Economics: Principles & Policy
Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Chapter 19, Problem 5TY
To determine

Explain the change in price.

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The reaping, processing and sale of sugarcane is a booming sector. However, the late 1990s and early 2000s saw a crisis for sugarcane producers. During this period, the quantity supplied of sugarcane outweighed quantity demanded and the market was in turmoil. Over time the price of sugarcane recovered after 2014, peaking in July 2018. In part, this was due to farmers diversifying into other crops; in part, it was due to buoyant global demand for alternate products. In 2019, however, a combination of good harvests and a fall in fertilizer sugarcane prices caused supply to increase substantially. Although demand was still growing in developing countries, the onset of recession in developed countries was halting the growth in demand.     Illustrate and explain (i) how the sugar cane market changed during the period 2014 – 2018 and (ii) what would be required to maintain the original equilibrium price.
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