Assume that the markets for sugar cane, rum and whiskey are initially in equilibrium (i.e., supply equals demand in each case). Assume further that a good harvest impacts the world’s sugar cane crop....

Assume  that  the  markets  for sugar cane, rum  and whiskey are  initially in equilibrium (i.e., supply equals  demand in each case). Assume  further that  a  good harvest  impacts the  world’s  sugar cane  crop. Sugar cane  is  a  principal  ingredient  in rum, but  it  is  not an ingredient  in whiskey.  Rum  and whiskey are  substitutes  in consumption.

(i)  Discuss  the  impact  of the  good harvest  on  each  of the  three  markets.

 (ii)  Discuss  the  effect  on the  markets  for each of the  three  products  if the government  implements  a  price  restriction in the  sugar cane  market  with the  aim of protecting the  farmers. How  will  this  impact  the  revenues  for sugar growers, rum  producers  and whiskey producers?