Silo Pty Ltd: Demand and Supply

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Introduction of Taxes

If the government introduces taxes on the fertilizer that is used in farming wheat as a result of damages of water sources, then the supply of wheat decrease as fewer suppliers will be in a position to supply the commodity with the new cost (Houtart, & Bawtree, 2010). The supply curve will move inward as shown by (figure 3) below and the amount of supply will shift from N1 to N2 and the demand shifts from D1 to D2. The price of wheat in the market will increase from M1 to M2 and because the price of wheat is elastic Silo Pty Ltd will have to contribute more of the tax introduced than the consumers of the wheat. The taxes introduced leads to failure in the market as it causes inconvenience in the allocation of resources in the production of the wheat.

 

Description

Wheat and barley are considered to be one of the most traded and cultivated products in the world. Wheat is grown in over 130 countries and used in every region and country. Different companies have specialized in production, distribution, and processing of wheat in various parts of the world. Silo Pty Ltd is an international company that has specialized in the production of wheat and barley, the company and others in the market are affected by various forces in the United States and South America market. Studies have established that wheat is the most used grain in the world more than rice and maize.