...Supply and Demand and Price Elasticity Paper Betty Hargrove ECO/212 January 30, 2013 Vivek Singhal Introduction After careful evaluation of our daily commodities we have chosen, soap, oil, sugar, salt, tissue, flour, toothpaste, deodorant, electricity, and wheat. These lists of commodities are necessary in a basic style of life. Our chosen product to focus on throughout our paper is sugar. We will address the supply and demand shift of sugar in a market economy. Furthermore, we will address supply and demand and price elasticity as well as whether our chosen commodity is a necessity or a luxury. Supply and Demand Shift There are limited explanations of why the demand and shifts in sugar vary. One of these reasons is because of the federal tariffs that are put on sugar. A tariff or tax on the import or even export increases the price and make it less in demand. No one wants to pay more for anything that we were paying less for a week ago. Also now there are a few different substitutes of sugar then using the real things. There are brands such as Equal, Splenda, and Sweet and Low. These are known as artificial sugar substitutes. These artificial sugar substitutes are sometimes found in food that we consume daily depending on our likes. Items that are, labeled as “diet” or “sugar free” use artificial sweeteners. There is “sugar free gum” and “diet soda”. These products typically have artificial sweeteners. The demand for the sugar is how much the consumers are willing...
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...particular project, the supply and demand for chocolate as well as sugar cane was to be critically evaluated and commented upon. The information that was to be evaluated came from the Commodities Corner from Barrons.com titled Sour Outlook for Sugar Prices and from the Commodities section of the Wall Street Journal titles World’s Sweet Tooth Heats Up Cocoa. The project also calls for an economic report that is to be published in a trade magazine that services the U.S. Market for Non-Chocolate Candy. Throughout the economic analysis and report market equilibrium, identification of the main variables of the articles, interpretation of impact on supply or demand, application to the supply and demand model, as well as the qualitative forecast of price and quantity in the relevant market. A Depleting Market for Sugar Cane and Cocoa Beans With the decline in sugar cane prices the world trade outlook for sugar cane also declines. As one can interpolate from Figure 1, the plot of quantity demanded for sugar cane versus the price per pound of sugar cane, the market equilibrium price for sugar is on the decline and has been on the decline for the past couple of years. In fact, raw sugar prices for the month of March declined at 15.22 cents a pound, which is down 7.3% since the turn of the New Year; it is also the lowest level in three and a half years accordingly. With the provided supply and demand curve (Figure 1), gives a projected outlook on supply and demand, as well as projected...
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...causes of sugar price hike as discussed in the article above. [8 marks] The article as reported by Andrew Clark indicates that the main cause of the sugar price increase in the global commodity market occurred due to a simultaneous drop in the overall supply of sugar by the world’s largest sugar producer, Brazil, alongside a change in the supply and demand of the world’s largest consumer of sugar, India. In the case of Brazil, the world’s largest sugar producer, the drop in the supply of sugar occurred due to a period of heavy rain, as well as the decision to channel a large portion of sugarcane, an input into the production of sugar, into another industry, ethanol fuel production, hence significantly reducing the availability of this input to sugar production. Figure 1.1 below illustrates S1 as the original supply curve of sugar, and S2 as the new supply curve of sugar which has shifted to the Left. This shift to the left is caused by a decrease in sugarcane supply, an important input to sugar production. The effect is an increase in the Price of sugar due to a decrease in the quantity of sugar supplied globally. Coupled with the existing global sugar supply shortage caused by Brazil’s decreased production of sugar, India, the world’s largest consumer of sugar, encountered a bad monsoon season and went from being an exporter to an importer of sugar. This indicates that where India may have previously enjoyed a Surplus of their own domestic supply of sugar to meet...
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...about “What factors really determine the price of sugar in the USA?” based on the Financial Times article “Commodities: A sweet deal”. I divided the presentation in 3 parts. Firstly, I give a short introduction. Secondly, I speak about the determining factors and lastly I give a short summarise about the topic. [Click] 2. Slide: Ok, let’s start with the frame conditions of this topic. Sugar was once a luxury product and the demand for sweets is in our genes. Today, you can get sugar everywhere. [Click] The sugar market is one of the world’s strongest protected and supported market for agricultural products. [Click] The USA is the fifth-largest sugar producer in the world [Click] and the U.S. sugar policy used quotas and restricted imports to balance supply and demand. [Click] The purpose of these restrictions [Click] is the increase of the sugar price in the U.S. market. [Click] The question is “What really influences the sugar price in the USA?” We will see on the next slides. [Click] 3. Slide: On this slide we see on the left side the Price-Quantity-Diagram with the red supply curve and the blue demand curve, [Click] which is extensively inelastic. [Click] That’s means the percentage change in the price is higher than the percentage change in the quantity. A good example of an inelastic demand is the U.S. sugar-market, which is very price sensitive. Ok, let’s look at the supply curve. [Click] If the sugar supply rises, the supply curve shifts to the right side. [Click] The reasons...
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...Sugar remains in high demand because of its purpose and what it is used for. Sugar cane and sugar beets are crops that are refined sugar. These crops grow in many areas of the world. Sugar functions in a market economy that creates several factors that can cause shifts in supply and demand. Weather is a factor that can affect the supply of sugar. Sugar (sugar cane or beets) grown throughout the world, are subject to high temperatures, flooding, drought, and even insects and bugs. When sugar is lost in large amounts due to weather, the supply curve shifts to the left, quantity supplied drops, and prices increase. Causes for shifts in supply and demand for sugar are the variables that can shift the demand curve: income, prices of related goods, taste, expectations, and the number of buyers. Shifts in supply can be the supply increase, and the change that increases any quantity supplied at every price. This would cause the curve to shift to the right. Buyers that want to change the quantity and purchase at any price will shift the demand curve to the right. Buyers that want to lower the quantity and want to purchase at any price will shift the demand curve to the left. Federal tariffs on sugar increases the price, resulting in a decrease for the demand. Rising pressure on sugar prices drives the prices to double in the long term average. Production costs that are high and the ethanol grown are used in Brazil to set the platform for higher...
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...commodity such as sugar or tin. A buffer stock is an intervention system that aims to limit the fluctuations of the price of a commodity. A commodity is a good that is traded, but usually refers to raw materials or semi-manufactured goods that are traded in bulk. In free markets agricultural prices fluctuates from year to year depending on the level of output affecting both the famers’ income and ability to make long term plans. In some cases this has led to setting up buffer stocks to ensure consistent supply and income to farmers. The authorities sell from the stock when harvests are poor and buy in stock when harvests are good. This prevents huge price increases in bad times and low famers’ incomes when harvests are good. One reason why using a buffer stock scheme to stabilise the price of a commodity such as sugar or tin is a good idea is that it prevents fluctuations in the price of a commodity. This is because when the output of a commodity increases or decreases the government will be able to buy the excess stock and store it, or release the stock that they have stored. This means that, in the case of sugar and tin, there will not be a shortage causing an increase in price because the government will be able to release stock that they have previously stored to maintain the output and price, therefore leading to no fluctuations in the price of sugar and tin. Another reason why using a buffer stock scheme to stabilise the price of a commodity such as sugar or tin is a good...
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...Economic Factors That Influence Businesses Demand and Supply The demand and supply are two principal factors that affect the working of any business model. The demand is the will and ability of consumers to purchase a particular commodity, while supply is the ability of the business to provide for the demand of consumers. Suppose, a mobile phone infused with latest technology is introduced in the market, it will have a higher price because of its demand in the market. Its prices will continue to increase if the supply does not meet the demand. For instance, in the year 2000, weather played havoc with the sugar crops of Brazil, which is the largest sugar producer in the world. This led to a decrease in the supply of sugar, which in turn resulted in a steep rise in the sugar prices. However, after the initial price rise, the market forces came into play and the demand for sugar became equal to the supplied sugar. Marginal and Total Utility Utility is the amount of satisfaction, that is derived by consumers from the consumption of goods. It so happens that after continuous and successive consumption of units of the same goods, the satisfaction that is experienced by a consumer starts decreasing. This often results in short-term or long-term fall in sales. Some organizations prepare for the launch of another brand, before the fall in utility and sales is experienced. The launch of new brand ensures that the revenue trend of the business does not fall. Diminishing utility...
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...cause the supply curve to shift to the left. The cost of the negative externalities is internalised in the price of the good, this may reduce demand for the good and the level of its production, eating sugary food and drink will increase the likelihood of obesity, early death, depression and certain heart disease. Poor health will also adversely affects work and productivity. Higher prices would discourage people from consuming unhealthy foods. Reducing consumption of sugary foods would have a significant impact in improving health. Also, adding tax on sugar can create an incentive for firms to supply alternatives which are healthier. If firms have incentives to promote healthier foods and drinks with substantially lower sugar content, then consumers will to an extent follow the supply. Moreover, taxes raise revenue for government, this can be spent on alternatives like tax on cigarettes could be used for funding government services to help people to stop smoking. However, it is difficult to measure the level of negative externality. Demand for sugary and drink tend to be price inelastic, so higher taxes will not reduce demand much. Sugary foods are demerit goods. Demerit goods are goods whose consumption is regarded as being harmful to the people that consume them, but people are usually unaware about the harm that the demerit goods can cause. Due to imperfect information, consumers might not have enough information on how it might affect their health, so their demand for the...
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...SUPPLY AND DEMAND WHAT IS THIS CHAPTER ALL ABOUT? This chapter introduces market behavior and the intricacies of the market mechanism. It is helpful to continue to answer the basic questions of WHAT, HOW, and FOR WHOM and to briefly outline how the market system answers them. The chapter focuses on the allocative and distributive functions of the price system. The section on disequilibrium pricing -- price ceilings and floors -- provides an opportunity to illustrate the upside and downside of interference with market pricing mechanisms. The opening illustration of a kidney sale on eBay demonstrates the power and potential problems of markets. This introduction sets the general direction of this chapter, which is to look at how the market system answers the following questions: 1. What determines the price of a good or a service? 2. How does the price of a product affect its production and consumption? 3. Why do prices and production levels often change? NEW TO THIS EDITION • New headline on campus drinking • New headline on demand shifts for natural gas • One new question for discussion • One new problem LECTURE LAUNCHERS Where should you start? Supply and Demand analysis is the foundation of much of the analysis the student will perform during the semester. Therefore, it is important that students get a good start with this material. 1. Begin your discussion by identifying...
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...produce their ethanol. Not only is Brazil’s sugarcane-based ethanol the first renewable fuel to be cost-competitive with transportation fuel, but it is also the most economical compared to its competitors. The ethanol’s efficiency is due to the power of the sugarcane compared to corn as an ethanol feedstock, a perfect climate for sugarcane harvesting, and the large, unskilled, inexpensive labor force in Brazil. In addition, the U.S. uses almost double the amount of land to farm corn to produce ethanol as Brazil uses to harvest sugarcane to produce almost the same volume as ethanol. What is Ethanol? Ethanol is an alcohol fuel distilled from plant materials, such as corn and sugar. Ethanol is the main biofuel for transportation and Brazil is the greatest exporter globally of bioethanol. The sugar and ethanol industry in Brazil make up 2.3% of the Domestic Gross Product, generating 4.5 million jobs for Brazilian citizens. Not only is ethanol responsible for 50% of fuel volume consumed by cars and light vehicles, but it also represents 90% of gasohol, a blend combined with gasoline, used by many oil companies. Brazil consumes 31% of global ethanol consumption, of which 96% is used for fuel and the other 4% for...
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...level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy. Such inflation is part of a particular economic system, so that a complete change in economic policy would be needed to get rid of it. Structural Inflation Inflation that occurs because of high commodity price, fuel price hike, change in economic structure as happened in India from Agricultural Structure to Industrialization Structure. Monetary inflation It is a sustained increase in the money supply of a country. It usually results in price inflation, which is a rise in the general level of prices of goods and services. It usually results from government regulation, monetary policies to maintain economic growth during slow down. Inflation in India Wholesale Price Index (WPI) The Wholesale Price Index is the most widely used inflation indicator in India. This is published by the Office of Economic Adviser, Ministry of Commerce and Industry. The current series of Wholesale Price Index has 1993-94 as the base year and 435 commodities (98 primary articles, 19...
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...produce their ethanol. Not only is Brazil’s sugarcane-based ethanol the first renewable fuel to be cost-competitive with transportation fuel, but it is also the most economical compared to its competitors. The ethanol’s efficiency is due to the power of the sugarcane compared to corn as an ethanol feedstock, a perfect climate for sugarcane harvesting, and the large, unskilled, inexpensive labor force in Brazil. In addition, the U.S. uses almost double the amount of land to farm corn to produce ethanol as Brazil uses to harvest sugarcane to produce almost the same volume as ethanol. What is Ethanol? Ethanol is an alcohol fuel distilled from plant materials, such as corn and sugar. Ethanol is the main biofuel for transportation and Brazil is the greatest exporter globally of bioethanol. The sugar and ethanol industry in Brazil make up 2.3% of the Domestic Gross Product, generating 4.5 million jobs for Brazilian citizens. Not only is ethanol responsible for 50% of fuel volume consumed by cars and light vehicles, but it also represents 90% of gasohol, a blend combined with gasoline, used by many oil companies. Brazil consumes 31% of global ethanol consumption, of which 96% is used for fuel and the other 4% for...
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...Section A : Part 1 Price elasticity of demand measures the responsiveness of people to changes in economic variables. One of the determinant of price elasticity of demand is the level of income.People with higher incomes will tend to make demand become inelastic. For example, when the price of milo increases , the people with higher income will still buy it because it will not affect the ability of purchasing. The second determinant of price elasticity of demand is necessities versus luxuries.A price increase on necessities good such as bread , will not affect much on the percentage of quantity because necessities good have no close substitutes. On the other hand, people will cut back their purchases on luxuries good when the price of luxury good rises. Furthermore, availability of substitutes is one of the determinant of price elasticity of demand. The greater the amount of substitutes available, the greater the elasticity of demand. When the price of a good increases , the quantity demanded on good will fall off because consumers will buy the cheaper substitutes. Lastly, the determinant of price elasticity of demand is habits. People with habits tend to have an elasticity demand on their addiction,such as cigarettes and liquor.For example,when the price of cigarettes increases, the smokers will still willing to pay more to buy the cigarettes at a higher price. Section A : Part 2 Firms have to measure the responsiveness of price changes by using the concept of...
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...you to get fill your medications from different pharmacies. For example I was filling my prescription at Stop and Shop and one day the pharmacy told me that they no longer accept my insurance and I would have to go to CVS to fill all my prescription from now on. These insurance companies control everything whether you pay or not. What is a demand curve in health care? Provide an example of a demand curve in health care. How could this example affect the economics of health care? This predictable relationship between price and quantity demanded allows us to define demand formally as the quantity of a good or service that buyers are willing and able to buy at every conceivable price. The demand curve shows this relationship graphically. A graphical representation of this economic relationship produces the classic downward sloping demand curve and the upward sloping supply curve. At some point in time however, the treatment plan is completed, the patient is satisfied, and additional services are not needed. This is known as market equilibrium. When an industry becomes more competitive – either by too much supply or too little demand – market equilibrium fees tend to become elastic while patient volume becomes very sensitive to even small changes in price. This may be where we have arrived, right now relative to medical price elasticity....
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...JUTE INDUSTRY STRENGTHS: 1. Jute is a labour intensive industry, which engages 4.35 million people. 2. Jute industry has lot of potential of providing employment especially in East Indian region. Jute is an eco-friendly and biodegradable product. With the pressure from green movement, it is going to sustain through consumer's preference. 3. The industry has potential in domestic as well as international markets. 4. It provides wide variety in each product and exhibit diversified culture of India. 5. Industry caters to the different market sectors covering handicrafts, textiles and jewelleries. 6. It requires low capital investment 7. It is a great source of foreign revenue as it is a huge export industry WEAKNESSES: 1. Frequent revision of PJMA guidelines (to add or dilute items for jute packing) leaves the industry in confusion whether to invest further on the Jute technology development/product development / market expansion or wait for new policies etc. 2. Though jute industry is a labour intensive, wages represent 35 per cent of total conversion cost of jute Industry, which evades the profit margins. 3. Multi unionism is one of the major problems faced by jute industry and engages major concentration of routine management in resolving labour dispute. 4. The machinery used in jute industry is old and obsolete with age of machinery ranging between 40 - 150 years. They have lost their capacity to produce quality products and in spite of routine maintenance...
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