The first article published by (Leahy) in New York ‘brazil sugar production cost rise’; Supply is highly dependent on the prevailing price in the market. The two very directly where if the prices are higher, the suppliers will supply more to the market to maximize their profits. The prices of commodities are determined by several factors. On the part of the producer or supplier, the cost of production plays a major role in determining the quantity supplied to the market.
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From the article “brazil sugar production cost rise” quoted, we have noted that Brazil has been, and is still the major exporter of sugar to foreign markets mainly including America, Europe, and Africa. Brazil’s sugar was mainly competitive based on price alone as sugar cannot be graded into various grades thus price is a major determinant on the quantity of sugar supplied. Brazil has been producing sugar at the lowest cost per pound worldwide due to its favorable climatic conditions.
This has enabled the sugar manufacturers to manage to produce sugar with minimal investment in infrastructure and new agricultural methods. However, emerging producers of sugar have emerged and have invested heavily in good agricultural practices thus making their sugar cheaper than that of Brazil. This has made Brazilian sugar less competitive in the global markets thus reducing the quantity Brazil supplies to the world.
This article shows that Brazil has to invest heavily in infrastructure and good practices of farming to enable it to recover its lost competitive edge in the global supply of sugar (Leahy).
The Brazilian government has also raised taxes levied on sugar production; this has highly increased the cost of production thus reducing the quantity supplied to foreign markets. Other producing zones like Europe, Asia, and Egypt are overtaking Brazil in the supply of low-cost sugar thus denying it the required revenue.
Consumers tend to develop a skewed preference for that kind of product and shun it all together and start courting other markets that supply the same product at a lower price. This is demonstrated by graph B as below.
The second article, published by the Cnn website “Higher fares and more mergers for the airline industry, (Hume). Airline transport is the most relied upon the mode of transport between continents, countries and also with countries. Millions of people use this mode annually. This is because of its efficiency, and the less time it takes to connect between destinations as compared to other alternative modes of transport like by sea or road.
The costs of jet fuel, in general, have been rising day by day. This has pushed the airfares to skyrocket and thus making air transport expensive and only a preserve of the few and only where necessary. other factors affecting the airline industry include slack demand from passengers and economic slowdown in most regions of the world all affecting the ticket sales Major airlines have tried to use the principle of economies of scale by lowering their ticket fares thus attracting more travelers and minimizing their cost.
This, however, has not been the case with all the airlines as most of them fly with empty seats to many destinations due to lack of passengers. This has even pushed some of the airlines out of business. case in study is the ever loss-making Scandinavian airline in Europe and the bankrupt air Zimbabwe However most of the smaller airlines are merging and hedging of passengers to avoid a situation of flying with empty seats or crashing out of business. (Hume).
Previously we have had every country running its national carrier where the governments subsidized the airfares. This concept, however, is facing more and more challenges as many countries construe that it’s not the role of the government to do business. This has led to mergers of the national airlines from several countries though they retain their identity as the national carrier for each of the countries. This was aimed at ensuring national demand is taken care of (Hume).
With this competitiveness airlines are coming up with differentiated products to create more desires and to attract more clients, some airlines are now offering additional flying hours to their frequent fliers, others are offering free accommodation in case of a stopover and some even refund a certain percentage of the airfare in case of delays in departure. With all these factors in mind players in these industries have to think outside the box to increase the ever slowing down demand. As has shown, price is not the only determinant of air ticket demand as shown in graph A below.
Hume Tim, CNN, Web.
Leahy Joe, Financial Times. Web.