BACKGROUND

CBC News last year in December published an article saying our grocery bill in 2019 would increase. The prediction was based on the research and published in Canada's Food Price Report. The report predicted that there would be overall 3.5% increase in food price. In case you want to read the article, you can find it at https://www.cbc.ca/news/business/canada-food-price-report-2019-1.4930130.

QUESTIONS

1. A) Now you are asked to take a look at the data on input prices published by Statistics Canada following the link https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1810025801 or search 'Farm input price index, quarterly - Statistics Canada' on the web. The data is only available for two quarters for 2019 as of now.

List the data below on the variable 'Farm Input Total' and find the growth rate of price indices from 2019Q1 to 2019Q2 to obtain inflation in farm inputs.

B) The farm input prices are major predictors of supply of foods in the Canadian market. Based on the growth rate of farm input prices above, indicate below how the supply curve shifts for food products in Canada from 2019Q1 to 2019Q2? (2 marks).

__________ Shifts Left __________ Shifts Right

C) Show the effect on the graph below (2 marks)

Food $S

Quality of food

D) Refer to your indicated shift above. Do you think the claim of Canada's Food Price Report was correct in predicting a rise in food prices in 2019 (at least until first two quarters)? Explain briefly.

(2 marks) Correct _____ Incorrect ____