A Report on the Article

“Pricey Garlic; Consumers and Importers Raise a Stink over Steep Rise”
Taken from ‘The Star’ Dated 12th August 2010

As stated in the title of the article, the price of garlic has increased. This is
because of a shortage of this condiment. The wholesale price for garlic has tripled from
RM3-RM3.50 per kilo to a staggering RM8.50-RM9 per kilo. The price can even reach
higher than RM10 for higher grade garlic.

The limited supply of garlic is due to the great floods that are occurring in China,
especially in garlic producing areas such as Henan and Shandong. Malaysia relies heavily
on China as it imports all of its garlic from there. This total dependency leaves consumers
with no choice but to accept the price increase as garlic is not cultivated locally, leaving
them with no other alternative. Thus, garlic is a good that has an inelastic demand due to
its low substitutes nature.

Price

D
Quantity
Q2 Q1

To further compound the problem, there has also been a massive demand for this
condiment. Garlic is widely known for its medicinal properties. Combined with the swine
flu; or influenza H1N1 as it is alternately called; that swept through the world last year,
and consumers are scrambling to get their hands on garlic.

By intersecting the demand and supply curves, market equilibrium can be

determined. The price increase of garlic can be explained through market equilibrium due
to the changes in both demand and supply. In this case, demand has increased and the
demand curve shifts to the right while supply has decreased and the supply curve shifts to
the left.
 Price

S1

S0

D1

D0
Quantity
1

Accounting for 77% of global production, the world’s top producer of garlic is
China. Other garlic producing countries are India, South Korea, Egypt, Russia, United
States, Spain, Argentina, Myanmar and Ukraine. Since April, many countries are
competing to buy garlic from China regardless whether they are garlic producers or not.
Many importers are now worried as they only used to pay US$800 for a tonne of garlic
last year compared to the US$3000 per tonne they have to pay now.

However, Malaysian consumers should be thankful as the price of garlic here is

still quite cheap compared to the prices in other countries. Australian consumers have to
fork out A$30 (RM87) for a kilo, doubled its usual price. The price of garlic in South
Korea is about RM23-RM30 per kilo. Meanwhile, in China, even they are not spared
with prices increasing five-fold to 10 yuan (RM5) from 2 yuan (RM1) a kilo.

Report done by:

Frisha Fatinah binti Ishak
AC110 1G
2010269652