Evaluate the likely effects of fluctuations in sugar prices on a sweet company.
Increase in price of sugar will lead to a rise in production costs for the sweet company as it is a factor of productionResponse: reduce supply/ raising price (inward shift of supply on diagram)General points : Fall in producer surplus (can be shown on diagram), fall in employment, reduction in profits
IMPORTANT: EVALUATION!!!Price elasticity of demand: if inelastic then the producer can pass it onto the consumer Extent of price rise Ceteris paribus?
TOP MARKSThey could reduce the % of sugar in each sweetForward-buying
TH
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