The following is an excerpt from an article in the Singaporean newspaper, the Straits Times: Singaporeans with a sweet tooth could soon find themselves paying more for their favourite treats, as bakers and confectioners buckle under soaring sugar prices. Since March last year, the price of white sugar has shot up by 70 per cent, according to the New York Board of Trade. As if that didn’t make life difficult enough for bakers, butter and cheese prices have also risen, by 31 per cent and 17 per cent respectively. The increases have been caused by various factors: a steep drop in Thailand’s sugarcane production due to drought, higher sea freight charges, increasing demand from China’s consumers for dairy products and the strong Australian and New Zealand dollar. For the consumer in Singapore, what this may eventually boil down to is a more expensive bag of cookies, with prices at some bakeries expected to rise between 10 and 20 per cent. [The owner of a Singapore bakery, Mr. Leong Meng Pock], said that he intends to raise prices possibly as early as next month. A sugared doughnut at his shop sells for 50 cents [about US$0.30] and a slice of Black Forest cake for $1.80 [about US$1.13], prices that have remained unchanged since 1990. Next month, the doughnuts may go up to 60 cents and the Black Forest cake to $2. Said Mr Leong: “In Singapore, you have bread and cake prices that are at least 10 years old. This is especially true for the HDB [government-subsidized housing] neighborhoods, where customers are very price-sensitive.”See http://straitstimes.asia1.com.sg a. Do you think bakers face a demand curve that is relatively elastic or relatively inelastic? Why? b. What has happened to their marginal cost?
The following is an excerpt from an article in the Singaporean newspaper, the Straits Times:
Singaporeans with a sweet tooth could soon find themselves paying more for their favourite treats, as bakers and confectioners buckle under soaring sugar prices.
Since March last year, the
The increases have been caused by various factors: a steep drop in Thailand’s sugarcane production due to drought, higher sea freight charges, increasing demand from China’s consumers for dairy products and the strong Australian and New Zealand dollar.
For the consumer in Singapore, what this may eventually boil down to is a more expensive bag of cookies, with prices at some bakeries expected to rise between 10 and 20 per cent.
[The owner of a Singapore bakery, Mr. Leong Meng Pock], said that he intends to raise prices possibly as early as next month. A sugared doughnut at his shop sells for 50 cents [about US$0.30] and a slice of Black Forest cake for $1.80 [about US$1.13], prices that have remained unchanged since 1990. Next month, the doughnuts may go up to 60 cents and the Black Forest cake to $2.
Said Mr Leong: “In Singapore, you have bread and cake prices that are at least 10 years old. This is especially true for the HDB [government-subsidized housing] neighborhoods, where customers are very price-sensitive.”See
http://straitstimes.asia1.com.sg
a. Do you think bakers face a demand curve that is relatively elastic or relatively inelastic? Why?
b. What has happened to their marginal cost?
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