Every man is rich or poor according to the degree in which he can afford to enjoy the necessaries, conveniences, and amusements of human life. In most societies , it is believed and proved that it’s very hard for one single man to provide for himself all the necessities of life (food, clothes, and shelter) without deriving any help from another man. The far greater part of them, say amusement, he must get from the labour or toil of other people, hence, he must be rich or poor according to the amount of another man’s labour which he can command or purchase.
Real price tends to be used to make comparison of one good, to a group or bundle of other goods across different time periods, such as, one year to the next or from one place in time to another. Nominal price on the other hand, is the value or market price of a certain commodity at a particular place and time in terms of money.
Explanation of the Real and Nominal Variables
In each and every economy, there exist two groups of variables; the first group consists of nominal variables measured monetary physical units. For examples, the income of Ugandan corn farmers is a nominal variable. Because, it is measured in shillings whereas the quantity of corn they produce is a real variable. Because it is measured in bushels for instance Nominal GDP is a nominal variable because it measures the shilling value of the Ugandan economy’s output of goods and services; Real GDP is a real variable, because it measures the total quantity of goods and services produced, this however, is not influenced by the current prices of those goods and services.
Applying the classical dichotomy is tricky when we turn to prices; most prices are quoted in units of money and, therefore, are nominal variables. When we say that the price of corn is $2 a bushel, or that the price of wheat is $1 a bushel, both prices are nominal variables. But what about the relative price: the price of one thing compared to another? In the above mentioned example, we could say that the price of a bushel of corn is 2 bushels of wheat. This relative price is not measured in money. When comparing the price of any two goods the dollar sign cancels and the resulting number is measured in physical units, thus, while dollar prices are nominal variables, relative prices are real prices.
Changes in Nominal and Real Prices of Food
As the covid-19 confirmed cases keep on increasing in Uganda, since March 21, the government of Uganda has enacted increasing control measures to limit the spread of the virus. The nation is currently under lockdown, with directives including: public transport to carry half of the capacity but not in border cities and districts; bars, salons, health clubs remain closed till 21 days; international borders and airports still remain closed; private cars allowed to drive up to 3 people in the vehicles; markets must separate food and non-food essentials; shops will open but not in malls and arcades; schools open for P7, S4, and S6 with no 1ST term examinations; the curfew remains for 21 days. These measures are disrupting income-earning opportunities and restricting access to food across the country. The urban poor (who are the biggest majority in and around Kampala) have been worst affected due to reliance on daily wages obtained through casual labour opportunities, petty trading,
food vending, construction activities and domestic work. Furthermore, panic buying, speculative trading, and supply chain disruptions resulted in atypical price increases for commodities, with the highest increase observed in urban areas.
Contrary to the high prices of commodities in Uganda due to the pandemic, the prices of good especially food commodities have for a long time, continued to rise since the global financial crisis in 2008. The first spell of food inflation occurred in June 2009, and the situation eased off in 2010. Subsequently, the country experienced high food prices since the beginning of 2012, 2015,2016,2018,2019, with prices of some commodities like sugar, fish, and milk rising by over 200%. In 2011, though, this was due to annual headline inflation rate that shot up to 30.5%.
Prices of Major Food Commodities in Uganda
Prior to the beginning of the lockdown, people purchased dry rations of common staples like maize flour , beans, peas, millet, salt, sugar, and cooking oil normally from all retail shops and markets at considerable prices . Resulting in a temporary spike in prices caused by the pandemic, however, aggregate demand for food and other household commodities has now decreased due to low purchasing power in urban areas which are final markets where mass consumption occurs. As a result, perishable food stuffs like, matoke, milk, eggs, horticultural crops, and vegetables have experienced low prices at the farm gate, given reduced demand. However the recent atypical demand from the government, as it purchases maize and beans in bulk to distribute to vulnerable people in urban areas has led to an upward pressure on stable prices.
The table below shows price variations of selected food commodities across selected retail food markets in Uganda prior to the beginning of the lockdown.
Maize flour Beans Local eggs
Maize flour Beans Local eggs
1,800/= @ Kg 3,500/= @ Kg 17,000/= @ Tray
1,400/= @ Kg 3,500/= @ Kg 10,000/= @ Tray
Causes of Changes in Nominal and Real Prices
In Uganda the cyclical movements in prices (nominal and real) of crop commodities are as a result of disruption of the production and supply cycles to the markets. This causes high food prices. Therefore the rise in food inflation has been linked to an increase in prices of food stuffs due to low supplies to markets; the extreme changes in weather patterns that has led to long dry spells in some regions of the country and floods in other regions; Seasonality in the cropping calendar affects the supply of food commodities in the markets; High fuel prices affect production and transportation costs of food items; desert locusts in areas of Teso, Karamoja, and parts of Acholi, and Lango sub-regions; droughts in key grain-produce regions, for example, Masindi, Soroti, Lira, Arua, Kabale, Mbarara, and Masaka; low stocks for cereals and oil seeds; increased feed stocks use in production of biofuels; rapidly rising oil prices and continuing devaluation of the US dollar; expanding populations and low funding to agriculture; and particular export restrictions that are viewed as temporary and generally inefficient
Based on global and national trends, additional reported cases of covid-19 are likely during this period due to both the spread of the virus and increased testing. However, given declining incidence in Uganda, the government is expected to gradually ease lockdown measures in order for some economic activities to resume. Some restrictions are expected to remain in place in the near term (3 weeks). It is anticipated that impacts on typical livelihoods, income-earning activities, and the economy at large will persist through until maybe September or beyond.
Wealth of the Nation………………………………………  The Library of Economics and Liberty……………….  Essentials of Economics: David Hume…………….  Famine Early Warning Systems Network………….  EPRC………………………………………………………………..  Agro Market-Day Uganda………………………………… 
Article by: Lwanga Alphat
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