Graph impact on global food prices...?

Question

From this article: "Increasing demand, especially in China" - The fast growing economies of China and India are enabling more ppl to buy pricier food like fruit and meat rather than less expensive staples like rice. Chinese meat consumption has more than doubled since 1980, and milk consumption has tripled. With such growing demand, more grain is diverted to feeding livestock rather than people.

"Will prices come down?" - the short answer: not anytime soon. A World Bank report projects that food prices will remain high for at least another year before increases in supply take hold in the market. But that report also says prices are likely to remain "well above 2004 levels" for the foreseeable future because other pressures--costly oil, demand for biofuels and protectionist trade policies--probably won't abate.

does this mean i graph an "AS/AD" graph (what kind of graph do I make?) and then does AD move right? & thats the *only shift*? no multiple shifts right???

please help! thx

Answer 1

Yes, AD will move right a bit due to increase in aggregate demand (higher income effect and increase in population). But supply is not following to demand (production boundary is limited) - so this gives rise in prices.