Econ 101 Paper

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THE ECONOMICS OF RICE
TABLE OF CONTENT

CHAPTER I: INTRODUCTION………………………………………………………………...2

CHAPTER II: RESULTS…………………………………………………………………………4

CHAPTER III: EVALUATION………………………………………………………………….5

CHAPTER IV: APPENDIX……………………………………………………………………...6

CHAPTER V: BIBLIOGRAPHY (WORKS CITED)………………………………………….9

The Economics of Rice

CHAPTER I: INTRODUCTION

Homogeneous products are products that are not easily branded. They are products that are so similar in their construction and in their make up that their brand names do not actually matter. Therefore the only way to distinguish between these products is through their prices. In today’s society, however, it is extremely difficult to have a truly homogeneous good because firms today will do everything in their power to try to “distinguish” their products: even products as similar as water. These firms try to monopolize their products by claiming their water is “purer” than the rest of the brand names. This is to say that, essentially, all their outputs are generally the same. They all contain H2O: two hydrogen atoms polarly and covalently bonded with a single oxygen atom in the liquid form. Homogeneous goods, such as water, are perceived as identical to the consumers’ eyes. Essentially, they are the same in size, taste, quality, and value. In this paper, I will be discussing another commodity and how it is perceived in the market as a homogeneous good. I will be discussing white rice and the implications of the economics of rice as a homogeneous good.

The good that each firm produces is identical to the good that the other firms produce. For instance, the farmer producing number 2 corn, or winter wheat, is selling a product that is indistinguishable from that sold by thousands of other farmers. If what you produce is identical to what hundreds or thousands of other firms produce, you are unlikely to be able to sway the price; if you charge a penny more per bushel for your corn, you will not be able to sell any of it. On the other hand, the producer of Coca–Cola is selling a product that is somewhat different from Pepsi–Cola, RC Cola, or generic grocery–store cola. Therefore, the Coca–Cola Company can vary its price and still have plenty of sales. It will therefore search for the most profitable price/quantity combination, rather than taking its price as constant (Joan Davies, 2013).

There are several types of rice. However, to make the product more specific for the paper, I chose white rice that is 5% broken as my example of a homogeneous good. White rice is a non-perishable grain that has the same genetic and chemical make up no matter where it is grown. It is difficult to differentiate rice because it is identical by every producer. Rice also has a long shelf life that is why you will not easily find “special deals” that alter the price of rice in different grocery stores and try to sell the rice for a cheaper price and discounted in order to get rid of it before it expires. Rice is mainly a homogeneous good because it is an identical product produced by every firm. Rice brands do not really matter when you are trying to purchase rice. Hence, the only way to distinguish between which rice to buy is through the prices. The higher the price of rice, the more likely you are to buy its complement from another firm/producer/company that will sell it for a lower price.

The market I have chosen to evaluate is the market for 5% broken white rice (6.5 mm) per 20-foot barrel (= 1 metric ton). I have chosen the international market for simplicity in order to evaluate the shipping (importing) costs of importing one 20-ft barrel of white rice in addition to treating the US as both a buyer of rice from other countries and a producer of rice locally. This is to emphasize the differences in prices despite the similarity in composition of the product. In this paper, the United States is used as a consumer when it
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