Price Ceiling Impacting Profits

A major sugar producer in Malaysia is urging the government to raise the price ceiling that has been put on Sugar. The reasoning for their dislike of the price ceiling illustrates the effects caused by price ceilings. Because the government does not allow sugar producers to raise their prices, these producers are having challenges making profits because global sugar prices have increased greatly. Because these producers are not able to adjust their price to match the global price, they are facing challenges in making profits. If producers are not able to increase there prices, it is very possible that the sugar industry will face shortages and reductions in production quality. In order to save money without raising prices, sugar producers will have the incentive to use cheaper production techniques that will have a reduction in the quality of the sugar they produce. As well, since the sugar producers will not have a great incentive to produce as much due to lower profits, it is possible that there will be a sugar shortage because producers will not supply enough sugar to satisfy the consumer demand for sugar. The sugar producers have faced a serious decline in profit since the global increase in the price of sugar. Without a change in the price ceiling, the sugar market in Malaysia will face the negative effects caused by price ceilings.

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