Government Intervention
The price of raw sugar recently reached its highest level since 1981 due to problems with supply. Historicallly, raw sugar has traded at between 10 and 12 US cents per pound at the New York Board of Trade. But the price increased to over 18 cents last month.
Growing
Sugar production in India for 2008-09 fell 45% yaar-on-year due to less rain in the monsoon season damaging a number of agricultural crops.
The London-based International Sugar Organization predicts that global consumption of sugar is likely to outstrip production by 9m tonnes next year, forcing food companies nadgovernmnets to dig into stockpiles. In the US, snack producers including Mars, Nestle and krispy kreme Doughnuts put pressure on the US government to relax import controls, warning that otherwise they might run out of sugar.
Commentators predict that most shoppers will be uaffectedbecasue sugar is such a small part of a onsumer's typical spending in a week that no one will notice an increase in price.
QUESTIONS :
1) Explain using
2) Do you think a) supply and b) the demand of sugar is price elastic or inelastic? Justify your choice and explain whether this means any given change is supply or demand will have a bigger effect on the equilibruin price of quantity.
3) in what ways is the market for sugar used in confectionery related to the market for ethanol?
4) How might companies such as Mars and nestle react to an increase in the price of sugar?
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