The small island of Tap, inhabited by the Tapese people, produces a single varie

Question

The small island of Tap, inhabited by the Tapese people, produces a single variety of corn. At the present time, each farmer produces his or her own corn, harvests it and carries it to the market for sale. On any market day in Tap, you will find many different sellers of corn. Competition between the corn sellers is very fierce-as a result, corn prices are quite low. Mega Company, the local beef producer, has announced that it wants to get into the corn business. The president of Mega Company believes that it would be more efficient to bring together all the farmers' corn at one large production facility where quality and packaging can be better controlled. Thus Mega Company acquires a license to enter into the corn industry, and begins buying all the corn from the individual farmers, packaging it, processing it and selling it in the market. The people of Tap are quite happy with the new packaging, and the uniform quality of the corn. However, the Tapese people also notice that the price of corn on the market begins to rise.

Using your knowledge of market structures in microeconomics, explain the changes in the corn industry in Tap.

Develop a response that includes examples and evidence to support your ideas, and which clearly communicates the required message to your audience. Organize your response in a clear and logical manner as appropriate for the genre of writing. Use well-structured sentences, audience-appropriate language, and correct conventions of standard American English.

Explanation / Answer

Changes in the corn industry:

M is a large production house. Once they enter into the market they take a large market share by producing and supplying corn on increasing quantity and better quality. Consumers are pleased to have M’s product, since the quality and packaging are uniform. In a true sense consumers become dependent on M’s product, which turns into monopoly rights of the company. Once such rights are enjoyed by any firm in a competitive market, price will be increased since the firm’s product will be more demanded than others.

Another reason of increase in price is addition of intermediary. Earlier farmers used to sell their products in the market directly. Therefore, they didn’t charge any additional amount for their supply service. Now packaging, processing, and supplying are done by M company. The company will certainly charge for these services, causing increase in price of corn.

Example: Products of online shopping are cheaper than the products of retail stores. Product comes into the retail shore through many intermediaries like wholesaler, distributor, commission agents, etc. In each level the price of the product increases because of that intermediary remuneration. Such thing doesn’t happen in online shopping, since products come directly from manufacturer house to consumer house.

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