Sugar Price Increase, Good or Bad?

On September 29, 2012 stated in the star news online the government had decided to reduce the subsidiary on sugar by 20cents in Malaysia’s budget 2013 tabled by Prime Minister Datuk Seri Najib Tun Tazak. It is said that the increase was caused by factors such as, natural disasters in producing countries that cause the decreases in supply and also global market price.

Our prime minister is hoping that the business community will not take advantage of the increment and burden the people by increasing the price of sugar but reduce the content of sugar instead. It is said that this could be a positive change since lifestyle related disease are mostly caused by excessive sugar consumptions, such as diabetes and obesity. On the other hand, Wan Ahmad said they could now act if businesses trying to manipulate the prices in order to get more profit charging unreasonable price. With enough evidence, their enforcement officers will take necessary actions against those who try to hijack the price of sugar.

As it stated, there is a big amount of positive comments on this change by the governments and it is said that it benefit Malaysians lifestyle instead. Helping to decrease the ratio of diabetic people. But again, what if consumers are willing to spend more instead of cutting down? As said, the demand will change due to changes in the market, it is hard to cut down on basic food product but people may reduce on consumption of luxuries and branded ones. Besides, as a consumer myself, we know it well enough how this increment will be the domino effect of price increment in all kind of food and drinks. For example, mamak will increase their teh tarik price by at least 20cents and even if you requested for less sugar, kurang manis. Same goes to the price of bread, desserts and everything that contain sugar. In this economy, no one will be willing to do loss business; it is always to maximize profit for their own living. And what is there to blame when the government is the one who increased the price. Some say, this small change will not make a huge difference to our cost of living as it is estimated sugar price will only cost about rm80 per month in a household. But what happens to the poor where they have to budget for every thing they buy, they consume. More or less it will affect the lower class level and caused them on a tight budget buying less of sugar. Hereby, price elasticity appear as the demand is affected by the changes of the price. And at the end of the day, we still need to pay tax and pay more for what we eat and having less disposable income.

There are different types of example for the demand of sugar, in the case of people that are having low sugar level; they will value the product highly. These consumers will buy the quantity that they will need even if the price is increased. But since they already capable to have what they need and the correct amount they will not buy any much more even if the price is lowered. In contrast, people that are having high sugar level will buy the same amount of sugar that they usually consume no matter the price increase or decrease. But certain consumers are very price sensitive, they will tend to buy whatever is cheapest.

For businesses, there will be good and there will be bad. Of course the profit they will be making is a positive change, they can be having a pack of 1kg sugar price increase by 20cents and the amount of sugar in a cup of milo increased by 20cents as well. But is this even fair to the consumers? Government said it is not right if you increase the price of a milo ais from rm1 to rm1.30 and you could be fined, but again which means that a maximum of increment of 20cents is acceptable. Now that mentioned, the amount is not reasonable to be measured at all.  Moreover what happen to those that choose to stay with the price that have been set earlier and decided to reduce the content of sugar instead? Come to think of it, it is bad business. This will affect the quality of whatever they are serving due to the necessity of what the food may need. And this will lead to customers unsatisfactory causing a loss in business. People will stop going for the usual and they will have to search for a better option or perhaps to substitute sugar with other products. For example, even with no change in sugar price, if there will be an abundant growth of corn, the demand for sugar will decline. As corn syrup can be substitute for sugar as sweetener. And when the demand decreases, the demand curve will shift leftwards and it goes otherwise.

The changes in sugar affect in many ways, either good or bad is depending of how you see it. For some, the demand of sugar may decrease as it is good in a way to start looking up of one’s health, as there is already a lot of pollution in the consumption of food and beverages nowadays. But as for my own opinion, even with the change the demand for sugar will not decrease if the reason given is for their own good with less sugar consumptions as truth is Malaysians have been neglecting their health for quite a long time. Also, the demand will not increase further since the price has gone up now.

Posted by Calista Yee Pui Ching