MANAGERIAL ECONOMICS ASSIGNMENT

TRIMESTER 1
Group 4 Members-

OVERVIEW

In our project we chose 4 products from Sugar industry, in order to calculate

price elasticities of demand for import and export from one particular trading
partner country and another for the whole world as well, the criteria for
choosing the industry and the products are taken to address regional
production gaps and control sugar prices

HNS CODE

1701: Cane or beet sugar and chemically pure sucrose, in solid form

1702: Other sugars, incl. chemically pure lactose, maltose, glucose and fructose, in solid
form

1703: Molasses resulting from the extraction or refining of sugar

1704: Sugar confectionery not containing cocoa, incl. white chocolate

ECONOMIC CHANGES AND POLICY EVENTS

Sugar is an essential commodity. Its sales, delivery from mills and distribution well
regulated by the government under EC Act 1955.

The phase of surplus production continued in the government vide notification no

1059(E) dated 11-05-2012 as against dispensed with the requirement of export
release orders, there after the export of sugar was allowed free subject to prior
registration of quantity with DGFT.

Due to the expected drop in the sugar production during 2016-17, sugar season as
per current policy, export of sugar under OGL is free subjected to payment of 20%
custom duty and now the central government has withdrawn custom duty on export
of sugar to encourage sugar industry to start exploring possibility of export of sugar.

As Per the April 5, 2017, notification from the Ministry of Commerce and Industry’s
Director General of Foreign Trade will allow 500,000 MT of raw sugar imports
(subject to the tariff rate quota) to be imported through June 12, 2017. The decision
was taken to address regional production gaps and control sugar prices

Assuming normal market conditions, India may import an estimated 0.5 MMT of
sugar (mostly raw) in MY 2017/18. A 20-percent drop in total supplies over the last
three years will encourage imports only to augment local supplies while consumption
will recover marginally to 26 MMT. The preceding statement assumes duty-free
imports for commercial viability while export in forecast year is estimated to be
negligible except for some sugar re-exported under the under the Advance License
Scheme (ALS). Under the ALS, local sugar millers are allowed to import raw sugar
duty-free against a future export commitment.

WHY HAVE WE SELECTED SUGAR INDUSTRY 

Sugar industries development is backbone to economic development of the nation. In

India, Sugar industry is the second largest agro-based industry and it contributes
significantly to the socio economic development of the nation. Sugarcane is the key raw
material for the producing of sugar in India

. 

ELASTICITY

Elasticity is a measure of a variable's sensitivity to a change in another variable.

In business and economics, elasticity refers to the degree to which individuals,

consumers or producers change their demand or the amount supplied in response to
price or income changes.
It is predominantly used to assess the change in consumer demand/producer supply
as a result of a change in a good or service's price.

Methodology

The price elasticity of demand is the percentage change in the quantity demanded of
a good or service divided by the percentage change in the price. The price elasticity
of supply is the percentage change in quantity supplied divided by the percentage
change in price.

ELASTICITIES (IMPORT & EXPORT)

FOR HNS 1701: Cane or beet sugar and chemically pure sucrose, in solid form

Export Elasticity (World)-

In the Export Elasticity of the world  With India we can see that the elasticity has drastically
changed from 4.822 to 1.157 from the year 2016-17 to 2017-18 i.e. the inelasticity has
decreased . This happened because there was an increase in the “change in price “ thus leading
to a decrease in the “change in quantity” exported in these two years.

Then in the next year the inelasticity further increased to 10.7668 followed by another drastic
change in the elasticity , which changed to 5.299

Elasticity

2016-17 2017-18 2018-19 2019-20

-
Change in 0.3821018 0.3008113 1.0366621 0.3632192
Quantity 66 95 01 28
- -
Change in 0.0792361 0.2599814 0.0962828 0.0685376
Price 45 91 72 26
- - -
4.8223176 1.1570492 10.766838 5.2995595
Elasticity 96 72 15 48

Export Elasticity (India-Sudan):

In the Export Elasticity with Sudan we see that elasticity in the period of 2016-17 was 7.3 which
further decreased to -2.14 in 2017-18, since the price decreased the exports also increased.

Then in 2018-19 we see an increase in the elasticity i.e. It shoots up to 6.7968. This could have
been due to the fact that the change in price is not much, but there is a sufficient difference in the
change of the quantity.

Then again, we see a steep change in the elasticity from the period of 2018-19 to 2019-20 and
again it becomes inelastic.

Elasticity

2016-17 2017-18 2018-19 2019-20

Change in 0.0837087 0.3689271 0.6351154 0.0720192

Quantity 36 4 32 55
- - -
Change in 0.0114664 0.1717529 0.0934427 0.0869297
Price 41 91 73 84
- - -
7.3003237 2.1480099 6.7968384 0.8284761
Elasticity 97 9 29 79

Import Elasticity (World)-

In the Import Elasticity of the World with India we can see that the price per unit in 2016 was high
and as it reduced drastically ,the imports also increased sharply, leading to an elasticity of -
4.693.

Then in 2018-19 we see a very sharp increase in the elasticity ie. it shoots up to 4.056. This
could have been due to the fact that the change in price is not much , but there is a sufficient
difference in the change of the quantity .

Then again as the price reduces the imports increase leading to a change in the elasticity to
12.54

Elasticity

2016-17 2017-18 2018-19 2019-20

Change in 0.1956175 - - 1.3580987

Quantity 69 0.2803364 0.5382760 57
 37 75
- - -
Change in 0.0416814 0.2328598 0.1326786 0.1082981
Price 72 95 29 67
- - -
4.6931540 1.2038845 4.0569915 12.540366
Elasticity 4 83 52 95

Import Elasticity (India-Brazil) –

. In the Import Elasticity of the Brazil with India we can see that the price per unit in 2016 was
high and there was a mixed trend with respect to the price and quantity

Elasticity

2016-17 2017-18 2018-19 2019-20

- -
Change in 0.1956175 0.2803364 0.5382760 1.3580987
Quantity 69 37 75 57
- - -
Change in 0.0466142 0.2415060 0.0288436 0.0301829
Price 91 18 89 47
-
4.1965149 1.1607844 18.661831 44.995565
Elasticity 42 79 73 44

 FOR HNS 1702: Other sugars, incl. chemically pure lactose, maltose, glucose and
fructose, in solid form

Import Elasticity (World)-

Effects of COVID-19 can be clearly seen in the imports of sugar in India as the value of
imports have had sharp decline as compared to past trends.

In 2018-19,the elasticity was at -0.779 and we can see that there is sharp increase in
elasticity in 2019-20 i.e 12.356.
 Elasticity

2018-19 2019-20

Change in Quantity -0.158283708 0.204359719

Change in Price 0.203011819 0.01653912
Elasticity -0.779677306 12.35614217

Import Elasticity (India—Netherlands)

In the Import elasticity of Netherlands with India we can see that the imports were initially
high and there was a decrease in imports every year till 2019.

In 2018-19 the elasticity was -0.672 which further decreases to -0.707 in 2019-20.

Elasticity

2018-19 2019-20

Change in Quantity -0.05853211 -0.110504775

Change in Price 0.087005303 0.156243177
Elasticity -0.672741869 -0.707261445

Export Elasticity (World)-

In the Export Elasticity of the world   With India we can see that the elasticity has drastically
changed from 0.038 to 2.338 from the year 2016-17 to 2017-18 i.e. the inelasticity has
Increased.

Then in the next year the elasticity decreased to 1.909 followed by increase in the elasticity , to
3.488.
 Elasticity

2016-17 2017-18 2018-19 2019-20

-
Change in 0.0174174 0.0815227 0.4795080 0.2993615
Quantity 83 67 18 28
- -
0.4551563 0.0348552 0.2510564 0.0858175
Change in Price 33 08 76 37
- - -
0.0382670 2.3388977 1.9099607 3.4883490
Elasticity 35 73 59 93

Export Elasticity (India-Indonesia)-

In the Export Elasticity with Indonesia we see that elasticity in the period of 2018-19 was -
205082.99 which further decreased to -53000.25v in 2019-20, since the price decreased the
exports also increased.

Elasticity

2018-19 2019-20

Change in Quantity -17257 8294

Change in Price 0.084146419 -0.156489821
Elasticity -205082.9994 -53000.25216

 
 FOR HNS 1703: Molasses resulting from the extraction or refining of sugar

Import Elasticity (World)-

In 2016-17 the change in quantity was initially high and further it decreases in 2017-18 and
then it increases.

The elasticity was 5.20 in 2016-17 which reduces to 3.662 in 2017-18 and it further reduces
till 2019-20.

Elasticity

2016-17 2017-18 2018-19 2019-20

Change in 3.2648014
Quantity 17 -0.81 1.52 -0.91
- -
0.6276914 0.2208644 0.5906212 0.4588171
Change in Price 54 41 57 32
- -
5.2012838 3.6625872 2.5660819 1.9835988
Elasticity 38 17 26 2

Import Elasticity (India-Nepal)-

In the Import elasticity of Nepal with India we can see that the imports were initially high and
there was a decrease in imports till 2018 and it increases in 2019 and further decreases which
shows the mix trend.

In 2018-19 the elasticity increased to 225.19 which further drastically decreases to -22.83in
2019-20.

Elasticity
 2016-17 2017-18 2018-19 2019-20
- -
Change in 0.0352097 0.6675611
Quantity 05 44 5.35 -0.91
-
0.1576315 0.5550609 0.0237755 0.0399050
Change in Price 71 54 46 87
- -
0.2233670 1.2026807 225.19960 22.832924
Elasticity 88 85 86 1

Export Elasticity (World)-

In the Export Elasticity of the world   With India we can see that the elasticity has drastically
changed from 2.771 to -18.745 from the year 2016-17 to 2017-18 .

Then in the next year the elasticity increased to 7.203 followed by deccrease in the elasticity , to
0.513.

Elasticity

2016-17 2017-18 2018-19 2019-20

- -
Change in 0.49048525 5.86894579 0.69660913 0.13436597
Quantity 5 1 3 2
-
0.17697222 0.31309163 0.09669961 0.26181520
Change in Price 5 7 3 7
- -
2.77153805 - 7.20384609 0.51320919
Elasticity 4 18.7451375 7 7

.
Exports Elasticity(India- Korea)

In the Export Elasticity with Korea we see that elasticity in the period of 2018-19 was 11.454
which further decreased to 5.101 in 2019-20, since the price Increased the exports also
increased.

Elasticity

2016- 2017-
2018-19 2019-20
17 18

Change in #DIV/ 2.71787252 1.25446952

Quantity -1 0! 1 9
#DIV/ #DIV/ 0.23726673 0.24590031
Change in Price 0! 0! 6 5
#DIV/ #DIV/ 11.4549243 5.10153689
Elasticity 0! 0! 8 7

Product: 1704 Sugar Confectionary not Containing Cocoa, incl, white

chocolate

Imports Elasticity (World)-

In the Import Elasticity of the World with India we can see that the price per unit in 2016 was high
and as it reduced drastically ,the imports also increased sharply.

Then in 2018-19 we see a very sharp increase in the elasticity ie. it shoots up to 3.162. This
could have been due to the fact that the change in price , but there is a sufficient difference in the
change of the quantity .

2016-17 2017-18 2018-19 2019-20

-
Change in 0.2924723 0.2540742 0.0886237 0.1013046
Quantity 76 72 75 31
Change in Price - 0.1660813 0.0280198 -
0.1531988 11 97 0.2122342
 5 08
-
1.9091029 1.5298185 3.1628872 0.4773247
Elasticity 42 58 68 09

Imports Elasticity (India-Bangladesh)-

In the Import elasticity of Bangladesh with India we can see that the imports were initially
low and there was an increase in imports till 2019-2020.

In 2018-19 the elasticity increased to 2.29 which further increases to 4.55 in 2019-20.

Elasticity

2016-17 2017-18 2018-19 2019-20

Change in 0.4931402 0.0464522 0.7478048 0.9952553

Quantity 44 72 78 73
- - -
Change in 0.2793891 0.3119275 0.3255139 0.2184338
Price 54 5 39 66
- - -
1.7650658 0.1489200 2.2973052 4.5563235
Elasticity 1 67 42 68

CROSS PRICE ELASTICITY

Cross Price Elasticity of Demand

The cross-price elasticity of demand is an economic concept that measures the

responsiveness in the quantity demanded of one good when the price for another
good changes.