Here is an article which shows the rising prices of sugar due to market pressures.S-grade sugar rose by Rs 5 a quintal and M-grade by Rs 10 in the spot market, extending last week's gains, on higher demand.
Read this article
ttp://www.thehindubusinessline.com/markets/commodities/article2546346.ece
Answer the following questions
What is demand?
Why do you think the price of sugar is going up in the market?
How will you show this phenomenon with the help of a diagram.
Apart from the factors mentioned in the article, are there other factors which might affect price of sugar. Comment.
Should government intervene ? Discuss price control measures.
Demand is the want or willingness to buy a specific product/service backed by purchasing power,at a certain time period.This article reflects the price hike in the market of sugar mainly due to the increasing demand for it from the bulk and retail buyers, considering the nearing festive season of Diwali and also because of the shortage of trucks for supplying sugar.Due to the rise in the demand of sugar, the suppliers tend to shift up the price level from P to P1( new price),which results in the small decrease of demand from D1 to D, but the quantity demanded of sugar only decreases by a small amount, as the demand for sugar is relatively price-inelastic, considering the urging need of it by all consumers. The intervention by the government would be quite beneficial as the prices would be expected to decrease to a certain extent by the introduction of buffer stock schemes ,through which a price band would be set ,not allowing the price of sugar to be too high or too low. Thus, with the introduction of buffer stock schemes, some amount of relief is plausible for all consumers, in terms of lower prices, but at the same time, the revenues of the various producers of sugar are not expected to fall by a large amount.
ReplyDeleteIshan and Aarush
Demand is the amount of a particular economic good or service that a consumer or a group of consumers will want to purchase at a given price backed by purchasing power. This article reflects the increase in price of sugar mainly due to the increased demand for confectionery products in diwali, the price hike is also reflected due to the rise in transportation costs inflicted in the economy.
ReplyDeleteThe suppliers will want to shift up the price level from P to P1, which will cause a contraction in the demand curve, though the effect wont be significant due to its inelasticity in the market. The government can intervene by retailing sugar through government recognized fair price shops, in the short run this will help to meet the increased demand of the consumers.
Sammarth Tuli
Demand can be defined as the willingness of a certain group of people to pay for a particular product/service during a certain period of time. The article focuses on the reasons for this sudden rise in prices by showing how, due to a shortage in another market, a cross elasticity of demand has taken place, leading to a rise in price in both the markets. It further shows that since the diwali season has approached, where sugar is required to make sweets, this might also be a cause for this rise in prices. The huge rise in prices can be attributed to the fact that, since sugar is inelastic,it takes more price hikes than usual to bring the supply and demand curves to an equilibrium. To represent this particular phenomenon, I will draw two demand curves on a graph, to represent the demand for sugar before and during the Diwali season. It will be more inelastic during the Diwali season. I will then draw the supply curve for sugar, and will show that at the at the price during the original point of equilibrium, there will e excess demand with relation to the new demand and supply situation. Then I will show the new equilibrium point in the diagram and explain why it is necessary for prices to be increased. I believe that this particular industry could be influenced by the fact that there might nave been a fall in the artificial sweetener industry as some people who used artificial sweeteners might have decided to switch to sugar to make their sweets for Diwali, hence leading to some of the demand from that market entering the sugar market. I believe that the government should interfere in this but, only for a certain period of time. The government can give subsidies, but these are effective only in the long run and not a short run situation such as this. Instead, the government could include more sugar in its ration card schemes, and could also use its bufferstock to ease the market pressure. The government could also interfere by using negative advertising to publicize the benefits of artificial sweeteners to help that market by diverting demand from the sugar market to the sweetener market till the market goes back to its original state of equilibrium.
ReplyDeleteDemand is the willingness and the ability to buy a certain product. One reason for the sudden rise in the prices of sugar could be due to the access demand for it. During the Diwali season when all the sweets and other sweet products are need to be made, need sugar in them which increases the demand for the sugar. As sugar is an inelastic product increasing its price a little wont effect its demand a lot the prices had to be risen with a high volume to cause some affect in them. Due to this the people would try to reduce the consumption of sugar by some amount make it equilibrium.
ReplyDeleteThe other factor that might affect the prices of sugar could be less labor due to the holiday period and also due to which the labor price would increase increasing the cost of production.
The govt. should not interfere in these matters as they would rather increase the taxes put on sugar and sweet products not letting the market get any profits.
demand for a commodity is the desire backed by purchasin power at a fixed price in a given time period
ReplyDeletethe price of sugar has risen due to the increase in deman and demand and price move in opposite direction as law of demand.even the logistics or the transport charges have risen from 8-10 rs hencce i feel that the price has risen and also in maharshtra the sugar quintals ariivin are more than the ones arrivin in other states.hence these all factors have led to the increase in sugar price rises.
ReplyDeletethere are many other factos that may affect the price of any other product..... taxation policy,govt intervention etc.even the supply if stopped from other firms then the price increase would probably be there.
ReplyDeletegovt should intervene becasue if it does not then the consumption of sugar will fall.
ReplyDeletein this case two types of price controls can be explained....
price ceiling..situation where the govt sets a maximum price,below the equilibrium price thst prevents producers from raising the price above it.
price flooring......situation where the govt sets a maximum price ,above the equilibrium pricewhich when prevents producers from reducing the price below.
Demand is defined as the ability or the willingness to purchase a product, at a given time.
ReplyDeleteAs the article states that the price of sugar increases due to access of demand of sugar as it is nearing the Diwali festival. One more factor that could have increased the price of sugar could be that there was an increase in the "transport charges" as they have risen by " 8-10" thus effecting the price of sugar.
There are other ways government can intervine in a particular market, either by providing subsides, to help produce more sugar.
The government should intervene in this market as it may lead to less consumption of sugar. The government could use the other products like artificial sweeteners rather than sugar, as it will lessen the demand for sugar.
Demand is defined as the willingness to purchase a good or service, backed by purchasing power. The article states that an increase in the quantity demanded was what had caused the rise in sugar prices. During diwali season, there is higher demand for sugar as it is used to make the sweet products that are passed around as gifts. At the same time, there has also been an increase by 'Rs.8-10' in the 'transport charges', causing the price of sugar to rise further. This rise in sugar prices can be shown on a demand-supply diagram with a rightward shift in the demand curve from D to D1 (which shows the rise in demand) and a shift in the supply curve in the opposite direction from S to S1 (which shows the fall in supply resulting from an increase in the cost of production- transport charges). This in turn, would cause the equilibrium price to rise from P to P1 and show the effect that the rising demand and higher transport charges have on sugar prices. The government should intervene so that the consumption of sugar does not decrease drastically. It could provide subsidies that would reduce the suppliers’ costs of production; or introducing buffer stock schemes which involve selling stocks of sugar and increasing its supply, to match the rising demand for it.
ReplyDeleteDemand is the willingness of the person to buy a product or service backed by the purchasing power at that given particular time.
ReplyDeleteduring the festive season the demand for products such as sugar increases. the article given is from the time of the festival of diwali wherein demand increases. also due to external disturbance due to the decrease in the number of trucks for transport there is a shift in the supply curve. this finally makes a new equilibrium since there is a shift in the curves in the given demand and supply curve.
the government should intervene during such a time by taking steps such as introducing the buffer stock in the market which would then decrease the price of the product.
Demand is the want or willingness to buy a specific product at a certain time period and a given price. The article about the price of sugar increases due to excess demand of sugar as it is nearing the festivals. Other factor for increase in sugar price could be "transport charges"; because the prices can shift from Rs. 10-15 and can rise further.
ReplyDeleteThe rise of price can be shown in a demand curve by the shift of demand curve from D to D1(outside curve) and can effect the supply for the product from S to S2(outward shift). This will happen because the price will increase and due to increase in price the supply for that product will increase at a higher rate because people will start buying that in a higher rate. The government should intervene during such a time by taking steps such as introducing buffer stocks which will reduce the price
Karan Singh Gill
ReplyDeleteDemand is the amount of people who are both willing and able to buy a product at a specific price and time.
Sugar prices are rising due to increased demand. Since sugar is an agricultural commodity, the supply curve will remain constant until the next harvest. This means that while the demand curve shifts outwards, the supply curve remains in the same location. This means that the price of sugar will rise.
Cannot draw diagram
The demand for sugar tends to change with seasons. In India particularly, many homemade desserts are hot and thus eaten primarily in winter - so when the weather get's colder, demand for sugar increases and increases prices. Drought or floods could also affect the sugar harvest and thus the supply and price of sugar driving it up. Conversely, if the government relaxes the bans on sugar imports, sugar prices will fall as local vendors scramble to equal the cheap foreign prices.
The government can intervene as sugar is quite an important commodity. I would suggest using the price band method, and keeping the price within a set minimum and maximum. This would mean buying up lot's of stock if prices fall in order to build up buffer stock, and if prices get too high, releasing said buffer stock to increase supply in the market and thus lower the price.