Food prices have been rising in the past decade or so. In 2008, many countries around the world saw rioters protest in anger against the rising cost of basic foods stuffs. Poorer countries were particularly affected. What are the root causes of the price rises? To some extent, foods producers are replacing food crops with crops used for bio-fuel production. While an immediate economic opportunity cost is not apparent in the case of bio-fuels, there is an obvious social opportunity cost as biofuel production increases. Another reason for the rising prices is the increasing amount of money in many developed economies as governments print money to help economic recovery. As the general economic situation in many developed countries deteriorated from 2008, investors have turned to commodities, including foodstuffs, as a hedge investment. This, coupled with lower interest rates which reduces the opportunity costs of hoarding commodities, has also contributed to increasing prices.

Questions 

1 What ‘social’ opportunity costs might result as more land is used for bio-fuels?

2 How would food growers use opportunity costs in decision-making?