1990s and early 2000s saw a crisis for sugarcane producers. During this period, the quantity supplied of sugarcane outweighed quantity demanded and the market was in turmoil. Over time the price of sugarcane recovered after 2014, peaking in July 2018. In part, this was due to farmers diversifying into other crops; in part, it was due to buoyant global demand for alternate products. In 2019, however, a combination of good harvests and a fall in fertilizer sugarcane prices caused supply to increase substantially. Although demand was still growing in developing countries, the onset of recession in developed countries was halting the growth in demand. a. Illustrate and explain how the market for sugarcane will maintain equilibrium over time given the problem that exists in the late 1990s and early 2000s. b. Is demand for sugar cane price elastic or price inelastic? Explain your reasoning. c. Illustrate and explain (i) how the sugar cane market changed during the period 2014 – 2018 and (ii) what would be required to maintain the original equilibrium price. d. Illustrate and explain (i) how the sugar cane market changed in 2019 and (ii) what would be required to maintain the original equilibrium price. e. Explain how revenue for sugar cane would have been impacted in July 2018 relative to the early 2000s.
1990s and early 2000s saw a crisis for sugarcane producers. During this period, the
quantity supplied of sugarcane outweighed quantity demanded and the market was in
turmoil.
Over time the price of sugarcane recovered after 2014, peaking in July 2018. In part, this
was due to farmers diversifying into other crops; in part, it was due to buoyant global
fall in fertilizer sugarcane prices caused supply to increase substantially. Although
demand was still growing in developing countries, the onset of recession in developed
countries was halting the growth in demand.
a. Illustrate and explain how the market for sugarcane will maintain equilibrium
over time given the problem that exists in the late 1990s and early 2000s.
b. Is demand for sugar cane price elastic or price inelastic? Explain your
reasoning.
c. Illustrate and explain (i) how the sugar cane market changed during the period
2014 – 2018 and (ii) what would be required to maintain the original
d. Illustrate and explain (i) how the sugar cane market changed in 2019 and (ii)
what would be required to maintain the original equilibrium price.
e. Explain how revenue for sugar cane would have been impacted in July 2018
relative to the early 2000s.
Step by step
Solved in 6 steps with 4 images
