reaction paper for January

Sue Gertrude G. Aguado

BSC-MA 3G  MWF 1:30-2:30pm

Sugar to Stay Costly

MANILA, Philippines—The government will not be imposing the suggested retail price (SRP) of sugar just yet as the supply is foreseen to remain tight, the chief of the Sugar Regulatory Administration (SRA) said. SRA Administrator Gina Martin, in a recent interview, said the SRP of sugar of P52 per kilo remained “suspended indefinitely.” She noted that the price of supermarket sugar was P68 per kilo while smaller retailers were charging P65 per kilo. The government in December suspended the SRP of sugar at the behest of retailers, who complained that P52 was way below the market price. According to the retailers, sugar should have been selling at P63-P65 per kilo. 

Source: http://business.inquirer.net/money/breakingnews/view/20110131-317612/Sugar-to-stay-costly

Reaction Paper

      The Suggested Retail Price (SRP) is a government program which controls the prices of goods in the market for the benefit of all. The decision of those charge with governance is a big deal in the prosperity of the economy. They must make decisions basing on our economy through the study of our market equilibrium. Thus, I agree with the decision of the SRA Administrator who suspended the SRP of sugar. Since the suggested retail price of P52 was way below the market price. 

       Let us say for example if the Equilibrium Price is P63, at this point there would be no Surplus or Shortage in the production. At a price lower than this like the SRP of P52, there would be shortage in the production. And at a price higher than the P63, there would be surplus. So if the government will impose SRP of P52 or a price ceiling of P52, then that would be a price ceiling that is binding. This is because the market equilibrium is above the SRP. The general result would be a shortage of a good arises and sellers must ration the scarce goods among the large number of potential buyers. 

      In terms of making decision, SRA seems to be independent on the will of the retailers only.Well, in that case, they should be independent. They must have their own study regarding the economy considering also both the sellers and buyers. Because every wrong move by the government, it would create negative result in our economy.