The price of a commodity in the market influences the supply and demand of the commodity in the market (Bas, Mayer, & Thoenig, 2017). Price elasticity is the fluctuation of supply and demand for goods in the market. The price keeps on changing when depending on the demand and supply of the commodity such as sugar in the market. Sugar is a consumer good; hence its price will influence the extent at which it bought it. The price elasticity of sugar keeps on changing depending on the demand and supply in the market.
There are non-price factors that influence the demand for sugar by consumers. These factors include the income of the consumers of sugar, when the income of the consumer increases then their purchasing power is raising the demand of sugar in the market (Bas, Mayer, & Thoenig, 2017). Where the income reduces then the purchasing power of the consumer reduces due to reduced income then the demand for sugar in the market reduces. The other non-price factor influencing demand sugar is the supply of sugar. When supply reduces the demand will increase as people compete for the less sugar and when supply is high the demand will reduce.
There are also non-price factors that influence the supply of sugar in the market. The no price factors affecting the supply of sugar in the market include the supply of raw materials such as sugarcane in the market. When factories lack the raw materials necessary for producing sugar that can be supplied to the market. The other non-price factor influencing the supply of sugar in the market include technology used in the production. The right technology will lead to oversupply since production is efficient.
The United States of America has never had sufficient sugar; therefore it relies on the imports to meet the demand. The country produces less sugar, so the imports are realized through a system of import quotas or tariff rate quotas. This means that there is no market equilibrium because the supply is less than the demand (Reddy, 2018). This market state leads to exploitation of consumers if the government does take any interventions. By offering subsidies, for example, the price is reduced for the buyers, and the suppliers will supply more.
Changes in the supply and demand effects the market equilibrium (Agarwal, 2018). If the demand shifts to the right which it interprets as an increase then the equilibrium increases. A decrease in demand, on the other hand, is illustrated with the shift of the curve to the left and it causes the equilibrium to decrease. For the supply curve, shift to the right means that there is an increase in the amount of sugar supplied and it leads to an increase in the equilibrium. On the contrary, the shift of the supply to the left means that the amount of sugar supplied has decreased which causes the equilibrium to increase.
To ensure that there is market equilibrium for sugar decisions should be made to ensure there is an increase in the supply of the product (Agarwal, 2018). This can be achieved by offering subsidies to the sugarcane farmers to ensure that they produce the product at a lower cost. Government subsidies paid to the suppliers are effective in increasing the supply of sugar. The subsidies also reduce the consumer burden because they lead to reduced prices for the product.
Agarwal, P. (2018). Supply and Demand Equilibrium | Intelligent Economist. Retrieved from https://www.intelligenteconomist.com/supply-and-demand/
Bas, M., Mayer, T., & Thoenig, M. (2017). From micro to macro: Demand, supply, and heterogeneity in the trade elasticity. Journal of International Economics, 108, 1-19.
Reddy, N. (2018). Market Equilibrium – Meaning, Causes, Types and More. Retrieved from https://www.toppr.com/bytes/market-equilibrium/