Table of Contents

1. INTRODUCTION .................................................................................................................................. 2
2. ILLUSTRATE AND EXPLAIN THE GIVEN SCENARIOS. ......................................................... 3
1. An increase in the price of fertilizer due to the war in Ukraine. ..................................... 3
2. A Global move away by consumers from dairy products towards a more plant
based diet coupled with increased global advertising by Bord Bia. .................................... 5
3. An increase in the use of renewable energy such as solar panels and wind energy
as a means of generating power. .................................................................................................... 7
4. Improvement in Technology that allows for greater efficiency in land use. ................ 8
5. An increase in GDP in china, leading to greater demand for Irish dairy products. .............................10
6. The EU directive of carbon emissions. .................................................................................................11
CONCLUSION..........................................................................................................................................12
Bibliography.............................................................................................................................................12
1. INTRODUCTION

Geopolitical factors, especially the war in Ukraine and the difficulties created
by Russia’s operations in the grain market caused supply chain challenges in
the Irish food industry. Concurrently, low unemployment rates were
accompanied by a chronic labor shortage. In the first half of 2023, the Irish
food industry showed a combination of possible and challenging dynamics.
Excellent performance in export in 2022 and a marginal decline in input cost in
the first few months of 2023 brought a sense of optimism. Nevertheless,
ongoing high food inflation which increased in May had significantly impacted
the consumer purchasing power. Despite this, The Irish food industry
remained confident in its growth track. A new government agri-food regulator
was established in May 2023 to improve agricultural and food supply chain
transparency to support the welfare of farmers, fishers, and food providers. The
industry is still attempting to innovate and take advantage of growth prospects
while navigating a complex landscape despite these obstacles. (Ryan, 2023)
2. ILLUSTRATE AND EXPLAIN THE GIVEN SCENARIOS.

Figure 1: The market equilibrium for Irish Dairy Products, Demand and Supply
Curve, own illustration.

1. An increase in the price of fertilizer due to the war in Ukraine.

The increased price of fertilizers will have a significant impact on the global
agricultural sector particularly the Irish dairy industry as fertilizer is an
essential product for dairy farming. When fertilizer price increases due to
geopolitical factors, then the production cost will also increase for Irish Dairy
farmers.

Thus the increase in the price will cause the reduced supply for dairy products
in Ireland. So there will not be enough dairy products available in the market
due several farmers being discouraged from expanding or entering the
industry. Consequently, consumers may experience a hike in the prices of
dairy products as producers pass on the elevated costs to maintain their profit
margins.

Figure 2: : Surplus and deadweight loss as a result of price increases on

fertilizers, own illustration.

By analyzing the diagram above, it can be noticed that an increasing price of

fertilizers leads to a situation where the price is no longer at equilibrium (E),
the quantity demanded (Q1) has fallen but the quantity supplied (Q2) has
increased. An increased price of fertilizers creates a surplus (green triangle)
and a deadweight social loss (red and orange triangle ) as shown in Figure 2. A
deadweight loss occurs when the demand and supply are out of equilibrium
and measures the loss of economic efficiency.
Figure 3: Price Inelastic demand, own illustration .

The price elasticity of dairy product demand determines how much of a price
increase there will be; more inelastic demand will result in a higher price
increase. Under these conditions, dairy companies need to figure out how to
keep expenses under control and look into other options to stay competitive.

2. A Global move away by consumers from dairy products towards a more

plant based diet coupled with increased global advertising by Bord Bia.

a) The supply and demand of Irish dairy products will be significantly impacted
by the worldwide shift away from dairy products towards a more plant-based
diet along with Bord Bia’s global advertising. If this global movement occurs the
consumer demand will decrease for the traditional dairy products. By
advertising campaign, if consumers are positive about new substitutes, then
the market price and quantity of the dairy product will decrease accordingly.
Figure 4: Introduction of new substitute and change in demand, own
illustration.

A plant-based diet will significantly impact the consumer demand of Irish dairy
products, and it will decrease the market equilibrium price and quantity of the
Irish products. By analyzing the diagram above, it can be noticed that the
demand decreases from (D0 to D1) and it causes a fall in the price (P0 to P1)
and Quantity (Q0 to Q1) of the products in the market respectively. (Anon, n.d.)

b) In another scenario, because of Bord Bia's plant-based diet worldwide

promotion, Dairy producers might boost their production to survive in the
current situation of new substitutes. So maybe they will increase the supply of
dairy products.
Figure 5: Increase in the supply of Irish dairy products, own illustration.

According to Figure 5, an increase in supply substantially decreased the price

(P1) of dairy products and a new equilibrium (E1) was formed and hence the
quantity (Q1) increased. The equilibrium price and quantity of the product are
influenced by the shift in supply and demand .If the decrease in demand
surpasses the increase in supply it might cause the fall of the price and
quantity .

3. An increase in the use of renewable energy such as solar panels and

wind energy as a means of generating power.

Increased use of renewable energy can lead to lower production costs because
now they have an alternative for electricity from nonrenewable sources of
energy. Reduction in energy expenses can have a good influence on dairy
production costs, which will eventually help dairy farmers to increase the
supply of dairy products. By these sustainable production methods dairy
industry may see an increase in demand as consumers are more concerned
about sustainability in the current world.
Figure 6,The Introduction of renewable energy sources leads to increase in
demand and supply , own illustration.

According to figure 6, when the renewable energy source is introduced, there

will be a dramatic increase in the production of dairy products, which will
cause a significant rise in the demand (D1) and supply (S1). So accordingly
production quantity increases.

If the market is in equilibrium and market demand as well as market supply

for a commodity increase in the same proportion the price remains stable,
there is no change in the equilibrium price but the equilibrium quantity will
increase. (Anon, n.d.) . If demand for dairy is relatively inelastic, price changes
due to changes in supply may not have a significant impact on the quantity
demanded. However, if demand is elastic, even slight price changes could lead
to more substantial shifts in quantity.

4. Improvement in Technology that allows for greater efficiency in land

use.

An innovation that enhances the use of land effectively will result in more
availability of dairy products. If milk production can be done without
increasing the land area is made possible, it will increase the supply of dairy
products which eventually raises the dairy products in the market.
Technological advancement can lead to production cost savings for dairy
farmers, which may help in increasing the production.

Figure 7, technological advancement leads to an increase in the supply and

Quantity, own illustration.

According to Figure 7, the technological development leading to greater

efficiency in land use within the Irish dairy industry can increase the supply
(S1) of dairy products. An increase in supply due to improved efficiency can
potentially lead to a decrease in prices (P1). If demand for dairy is relatively
inelastic, the decrease in prices due to increased supply may not significantly
boost the quantity demanded. However, if demand is elastic, a drop in prices
might lead to a considerable increase in the quantity demanded.

• If it becomes easier to produce a product, the supply curve will shift to

the right.
Example: More farmland, technology available.
• Technology available
• Price Drops (Anon, n.d.)
5. An increase in GDP in china, leading to greater demand for Irish dairy
products.

If GDP in China increases and more demand for Irish dairy products occurs,
then Irish dairy products will become a premium and high-quality import item.
So this could increase the demand for them. Due to this rise in demand, Irish
products can increase the price the import to China, so the production will also
increase in the industry.

Figure 8, when increased GDP in China, leads to the demand for Irish dairy
products. own illustration

According to Figure 8, when increased GDP leads to the demand for Irish dairy
products, it causes increased demand (D1) and increased supply (S1). In this
case, the increase in demand is higher than the magnitude of the increase in
supply. So there will an ultimate effect in equilibrium quantities and price. So
there will be an new equilibrium point (E1) and a rise in price (P1). (World,
2020)
The heightened demand from China could encourage an increase in export
quantity from Ireland, potentially influencing the global market. The outcomes
would hinge on the price elasticity of demand in China, Ireland's capacity to
efficiently meet the increased demand, and the competitive landscape in the
Chinese market.

6. The EU directive of carbon emissions.

Reducing carbon emissions may lead to higher production costs for dairy
farmers, this can result in an increased in price of dairy products and it will
negatively affect the demand due to reduced affordability for customers. To
meet the emission reduction targets, dairy farms may need to adopt new, more
sustainable farming practices. These changes can impact the supply by
affecting the quantity of dairy products farms can supply.

Figure 9, When demand and supply decrease, own illustration.

According to Figure 9, the EU directive on carbon emissions results decrease in

both the demand and supply curves within the Irish dairy industry. The
change in the demand and supply determines the new market equilibrium for
the Irish dairy industry. The equilibrium is determined at (E1), but the price
remains the same, because if the cost is increased for the usual dairy product
suddenly it will discourage the consumers from buying the product. The
Quantity also decreased from (Q0 to Q1) with the fall in demand and supply.

(Anon, n.d.)

CONCLUSION

In conclusion, this assignment analyzed the potential impacts of various

economic events and factors on the Irish dairy industry using demand, supply,
and elasticity analysis. It highlighted the importance of adapting to consumer
preferences, sustainability trends, and regulatory changes for the industry's
long-term success and competitiveness.

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