CASE STUDY (20%)
Greetings of peace! Please find below the useful information regarding the group project (Case Study/Presentation). The deadline and instructions are listed for your compliance and action.
- Form max. 5 members in a group. Assign a group leader who will manage the group and report to the professor regarding the progress or problem faced while solving the case.
- Final file should be uploaded ONLY by the leader under his portal ID.
- Front page of the file should contain details of all group member’s Name and their student ID.
- Two similar files uploaded from more than one ID will result in cancellation of both the files.
- Deadline 26th NOVEMBER 2016. Portal will be closed afterwards and nothing in any form will be accepted.
The price of raw sugar recently reached its highest level since 1975 due to problems with supply. Historically, raw sugar has traded at between 8 and 10 US cents per pound at the New York Board of Trade. But the price increased to over 15 cents last month. Growing demand for sugar to be turned into ethanol for fuel, coupled with a sharp fall in production have both been factors in the price increase. Sugar production for 2010-11 fell 38% year-on-year due to less rain in the monsoon season in the highest sugar producing countries, damaging a number of agricultural crops. The International Sugar Organization predicts that global consumption of sugar is likely to outstrip production by 12m tonnes next year, forcing food companies and governments to dig into stockpiles. Snack producers including Twix, Galaxy and Dunkin 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 unaffected because sugar is such a small part of a consumer’s typical spending in a week that no one will notice an increase in price.
- Explain, using supply and demand analysis, why the price of sugar has been increasing recently.
- Do you think a) the supply and b) the demand for sugar is price elastic or inelastic? Justify your choices and explain whether this means any given change in supply or demand will have a bigger effect on the equilibrium price of quantity.
- In what ways is the market for sugar used in confectionery related to the market for ethanol?
- How might companies such as Twix and Galaxy react to an increase in the price of sugar?
Answer should not exceed more than two pages, with standard format of Times New Roman, Font Size 12, double line space.
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