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
Related Economics A Level answers
All answers ▸The UK government are planning on imposing a tax on sugary drinks. Discuss how a tax could be used to decrease consumption of sugary drinks and outline some potential issues.
Must I take Economics for my GCSES before A-levels? If not, will the catching up be difficult?
Evaluate the microeconomic impacts of a sugar tax
What would be the impact on the multipler effect given an increase in income tax?