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Explain using supply and demand analysis why the price of sugar has been increasing recently.

Explain using supply and demand analysis why the price of sugar has been increasing recently.

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Answer:-

It has been provided that sugar production has declined in some parts of the world due to weather-related factors.

This decline in production has resulted in a decrease in the supply of sugar.

On the other hand, demand for sugar is increasing at an unprecedented rate. Much of this demand is coming from the ethanol industry that needs sugar to turn it into ethanol for fuel.

When the supply of a commodity decreases while demand for it increases than in that case price of commodity rises.

A similar thing has happened with sugar.

Decrease in the supply of sugar while increased demand for it has resulted in a recent increase in the price of sugar.

Thus, the price of sugar has been increasing recently because while a supply of sugar is decreasing, its demand is increasing.

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