Supply and Demand Assignment | Economics Assignment

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Running head: SUPPLY AND DEMAND ASSIGNMENT 1Supply and Demand AssignmentName:Institution:
SUPPLY AND DEMAND ASSIGNMENT2A) The Law of Demand1) Locate a news article that discusses how demand may have changed in some way. Use thenewspaper, Internet, or magazines.2)Headline of the article: Australian sugar supply chain shake-up as sugar demand increases3) Write two-paragraph summary of the article. Include the following:a) Summarize the articleThe main idea in the article is the how Australian supply chai shook-up as sugar demandsurge. The articles hold that the supply chain of Australian sugar is set to shake-up due to theannouncement by the Wilmar International (giant miller) that it will cease exportation viaQueensland Sugar Limited. The Wilmar International would cut ties with Queensland Sugar atthe end of 2016 harvest season (AFN-Staff-Writers, 2014). The giant would create individualexport channel for 2017 harvest season going forward. It holds that the Australian sugar exportshas been controlled by Queensland sugar in the past. The legislation initially required that allsugar had to be sold to Queensland sugar. This meant that only one channel to market existed.All Australian were still went through Queensland despite deregulation in 2006. However, theheld that this one-sided channel was set to change in 2017. The article hold that by Wilmarestablishing its individual export channel, it was in essence creating an opportunity for growth ofrevenue. This could be essential to the company’s success.The sugar manufacturers looked to export markets for their growth as the slowerannualized growth of a mere 1.10% was forecast for sugar manufacturing industry over thecoming 5 years while businesses were becoming increasingly focused on international marketsfor growth in revenue. The manufacturers expected more than fifty percent of industry revenuein year 2013-14 to emerge from exports, indicating the significance of such global market tosugar industry. It was demonstrated that Wilmar’s own export channel would provide the
SUPPLY AND DEMAND ASSIGNMENT3company better control over exports to global markets thereby contributing to strong forecastgrowth in revenue of the coming five years. The farmers were less thrilled with the plans of theWilmar as the Queensland Sugar export channel has precluded price competition on sugar exportmarket. Farmers feared that the new channel creation would trigger a race to bottom on prices ofsugar exports as many farmers (more than 2,500) were expected to grow the cane formanufacturers. The farmers thus had negligible power to negotiate with giant sugarmanufacturers and hence contended with fluctuating weather trends, alongside volatile farmgateprices triggered by downstream export market exposure. Thus the farmers held that competitionvia price in the export market would put price pressure on farmers, thereby reducing revenue aswell as affecting their profitability.b) Identify what is being demanded in the article.The sugar and sugar cane by products.c) Identify whether demand has increased or decreased.The demand has increasedd) Explain why demand has changed in this way.There was also rising demand for sugar by-products that made the sugar cane farmerseven in a stronger position. This was due to surging global concerns regarding ongoingsustainability of oil that drove the biofuels’ demand higher. Thus demand had been surging forthe by-product of sugar utilized in ethanol production. Demand for sugar cane was thus projectedto increase suddenly as the technology was becoming more and more sophisticated and vastlyembraced. Such a demand would balance off the adverse price effects triggered by second exportchannel creation. The global sugar consumption was thus expected to increase over the comingfive years. Both income- and population growth in economies like India and China besides risingwesternization of diets, in those economies, were expected to propel sugar consumptionupwards. This would then stimulate the sugar cane demand hence promoting the growth in
SUPPLY AND DEMAND ASSIGNMENT4revenue as well as higher margins for profit for the growers. Consequently, annualized revenuegrowth of 3.20% was forecasted for sugar can growing industry over the coming 5 years, to hit ahealthy 1.20 billion dollars in 2018-19.e) Identify whether the product has an elastic or inelastic demand and explain why.The product (sugar and its by-products) has an elastic. This is because a small change inquantity demanded triggered a corresponding in price as indicated in the summary wherebyfarmers are worried that price competition would lead to less revenue and hence lessprofitability.4) Draw a demand schedule graph for the product and on the graph show how demand haschanged. Include labels as well as a supply line (S, Q, QD, QS, P, etc.)5) Equilibrium (Supply and Demand)a) Did price increase, or did it decrease? Did quantity increase, or did it decrease?The price increased from P1 to P2 as shown in the above diagram where the demandshifted from D1 to D2 outwards. The quantity demanded increased from Qd to Qd2 as shownabove.SD2D1P1Qd/QsP2Qd2PQ
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