How is the elasticity of demand concept useful for the Sugar industry?

Assessment Item 1 Part B – Case Study
Length: Approximately 2000 words

Part B
Case study

Introduction – no more than 300 words
Body – about 1500 words
Answering Question 1 to 5
Conclusion – 300 words

The point of this essay is to discuss the economic ramification of quality assurance, a cane sugars industry invocation equilibrium price and quantity of supply and demand.

This assessment item relates to course learning outcomes 1-5 as listed on page 1.

Case Study-Video Link: Quality Assurance: Interview with Bernard Milford, Senior Policy Manager Canegrowers Australia

CANEGROWERS… QUALITY ASSURANCE: The nature of a ‘product’ in competitive markets.
Review the basic underlying theoretical concepts and apply to the case study from modules 1 to 6:

In microeconomic theory the ‘competitiveness’ of a market (or an ‘industry’… the terms are generally used synonymously) is defined in terms primarily of (i) the number of producers of the product (‘firms in the market’), (ii) the degree of differentiation of the product of one firm compared to another, and, (iii) freedom of entry and exit. In a very highly (or, at the extreme, a ‘perfectly’) competitive market there are a large enough number of firms so that the individual firm is very small in relation to the industry as a whole and no single firm has any influence on the determination of the market price. Furthermore the product of each firm is effectively the same (homogeneous) as that of another.
This may be contrasted with a less competitive market. Such a market is generally termed an‘oligopoly’ where the competition is between a relatively small numbers of firms producing a product that is more obviously different to that of other firms. In this context individual firms may devote considerable effort and resources to making their product very obviously different to, and of higher
quality than, that of other firms. In a highly competitive market, however, (such as is the case in the production of many agricultural commodities like sugar) such expenditure is unlikely to result in sufficient gain in terms of increased sales and revenue to warrant such expenditure by an individual firm. At the same time it is in the interests of individual producers to contribute to industry-wide expenditure, funded by all firms, to ensure that the product of all firms is processed so as to ensure that each producer is able to maximize their returns in terms of the cost of producing the product. It is to undertake such activity that individual firms in a highly competitive industry establish and support industry associations to act on their behalf in assuring the quality of the product of individual firms and ensuring that the way in which the product is produced and processed maximises returns to individual producers.

Tasks to be undertaken:

1. Refer to and read chapter 1 to 9 to get a good understanding of the theory.

2. Listen to the video clip interview (Econ 11026 course website) or read the transcript provided in the course profile. Make notes, which will help you to answer the questions by applying theory to real life economics (relevant modules from 1-6).

3. Read what a case study is and how it should be analysed in economics and questions answered by applying the relevant theory from the chapters. Apply the DADA (Definitions, Assumption, Diagram and Analysis while answering the economic questions).

4. On campus students will be attempting boxed case study exercises in the workshop sessions. These exercises will help and guide you how to think like an economist, and practice for theory and apply it to real life examples from “Economics at work” boxed cases from the set textbook. In preparing your assignment, you need to ensure that you refer to the “essay writing guide for students studying economics” available on the Assessment section of the course Moodle website.

5. It is important in economics that you interpret the question clearly, use diagrams in an essay and write like an economist. Make sure you include in-text references and provide a reference list. Consult with the Learning Skills Unit staff or Communication Learning Centre staff on your campus if you require assistance on essay writing and referencing.

6. Write down some notes after viewing the video clip, paying attention to the particular topic areas for the week. It would be useful to view selected parts of the video and try and link the discussion in the interview.

7. On a weekly basis, the focus of your task for this assignment in the next five weeks is to elicit and apply economic concepts to the problem discussed in the interview. You need to listen carefully and “read between the lines” to grasp the important economic concepts being applied to this reallife economic issue regarding Sugar Cane Growers Industry & Quality Assurance.

8. Conduct research on related commentary in the media pertaining to the Sugar industry in Australia and Brazil, its demand, supply and the competitive advantage of Australia. You will need this additional information to overall draw conclusions and justify your answers. Now click on the following link to listen and watch the video and /or read the transcript provided below.
Quality Assurance: Interview with Bernard Milford, Senior Policy Manager Canegrowers Australia

Transcript: Interview with Bernard Milford, Senior Policy Manager Cane growers Australia:
The way we test sugar cane when it comes into the factory, first of all we weight it and then we crush the cane, and get the juice. We analyse the juice to see what the sugar content is. We measure the sugar by polar imagery which is the way of looking at the sample of sugar solution, sugar juice, shining a light through it, seeing how much the light is twisted as it goes through the solution and then we compare that with the standard and we know how much sugar is in it. We also measure the density of the juice and that gives us an idea of how much sugar plus impurities are in it. When we take away the sugar plus the sugar plus impurities we’ve got a measure of impurities. Impurities are important because when they leave the factory they take sugar with them and so we have to make sure we have the maximum amount of sugar with the minimum amount of impurities.
That’s the old fashion way of measuring it. Most sugar mills now use those methods but they calibrate it against a process called new-infrared Spectrophotragpy. Shine an infrared light into the sugar cane and have a look at the reflections back from that. You calibrate that against the measurements you know and you can get a measure of the sugar that’s in there, the impurities in there, the amount of fiber in there , the amount of dirt in there and various other parametersas well. All without touching the sugar cane.

9. Now prepare your answer in an essay format ensuring that you refer to the “essay writing guide for students studying economics” available on the Assessment section of the moodle course website addressing the following questions:
Note: Chapter reference refers to theory to be applied to this case. You do have to conduct on-line research and refer to articles related to Australian Sugar Industry.

Question 1: What is the significance of the quality assurance comments made by the speaker in the case of the sugar industry? What sort of ‘quality assurance’ activities does Canegrowers undertake on behalf of individual sugar cane producers; and to what end? How will you explain this in economic terms? (Read the transcript)

Question 2: Why is it in the interests of individual firms to support an industry association such as Canegrowers? Justify your answer. (Read the transcript)

Question 3: What factors does the sugar industry have to consider when determining the equilibrium price and quantity of supply and demand for sugar? Illustrate and explain. (Chapters 2, 3, 5)

Question 4: How is the elasticity of demand concept useful for the Sugar industry? Illustrate (Chapter 4)

Question 5: Explain and illustrate the market structure which applies to the Australian Sugar Industry. (Chapters 6 to 9)

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