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ECO 9730 Firms in a Global Economy 1 Analysis Report Case: India Shedding Tears Over Onion Prices Guideline Overall Purpose A manager or owner of a firm should understand the economic environment in which his / her firm operates, and the impact of external factors in the market in which it sells its product. This knowledge is essential when deciding the firm’s strategic move towards profit maximization. With the case assigned, we have an opportunity to critically analyze the impact of external factors in the market for a product (good or service). The case, India Shedding Tears Over Onion Prices, explores the impact of government policies in the market for onions. Although seemingly unrelated, both cases provide a reference point for an exploration of the impact of the pandemic on domestic markets. Since March 2020, the presence of the coronavirus, COVID-19, has impacted various markets in different ways. For instance, in their June 2020 WSJ article, McLaughlin and Taylor report on the varied impact of the pandemic on the monthly rent of luxury apartments in certain neighborhoods, while Parker in his March 2020 WSJ article discusses the government’s intervention in the housing market. On the other hand, Gasparro and Kang in their July 2020 WSJ article report a decline in supermarket staples while Colias in his July 2020 WSJ article, reports that the used car market has been experiencing a surge in sales. As such, the analysis paper involves responding to the questions based on the related case, and then with the help of guided questions, discuss the market outcome of a product (chosen by the team). Description of this Report This analysis report (3 to 5 pages) describes India’s domestic market for onions before, during, and after, the two-month period beginning with December 2010. Using the tenets from the onion market analysis, the report then describes the observed market outcome of a product before, and during the past six months (since March 2020) and discusses the potential or anticipated market outcome with government intervention. The discussion questions below, which guides the analysis, should be clearly answered in the report. https://www.wsj.com/articles/coronavirus-is-sending-luxury-rental-markets-on-a-rollercoaster-ride-11591287680?mod=searchresults&page=1&pos=6 https://www.wsj.com/articles/coronavirus-is-sending-luxury-rental-markets-on-a-rollercoaster-ride-11591287680?mod=searchresults&page=1&pos=6 https://www.wsj.com/articles/coronavirus-outbreak-pushes-local-governments-to-freeze-home-evictions-11584892859?mod=searchresults&page=1&pos=13 https://www.wsj.com/articles/coronavirus-surge-challenges-struggling-food-supply-chains-11594546200 https://www.wsj.com/articles/during-covid-19-pandemic-the-used-car-lot-is-hot-11593774001 ECO 9730 Firms in a Global Economy 2 Discussion Questions 1. During the two-month period – December 2010 to January 2011 – a sharp increase in onion prices was observed.1 The case presents quite a few factors and/or events that may have led to this outcome. Consider that the events were such that both the demand and the supply of onion in India were affected during the two-month period. What possible general combination(s) of changes in demand and supply would necessarily lead to an increase in the price of onions? Describe all possible combinations. Be sure to support your discussion by stating the average price during the two-month period. 2. Considering the same two-month period from question 1, what specific factors may have affected the supply of onions in India, and led to the increase in onion prices? Provide at least two factors and state whether these factors resulted in a movement along the supply curve or a supply curve shift. Would you consider these factors to have a different impact in the short-run supply compared to in the long-run?2 3. Considering the same two-month period from question 1, what specific factors may have affected the demand for onions in India and led to the increase in onion prices? Provide at least two factors and state whether these factors resulted in a movement along the demand curve or a demand curve shift. Additionally, state whether these factors have a long run (structural change) impact or a short run impact. 4. Given the impact of the factors/events discussed in questions 2 & 3, what perceptions can be formed about the price elasticity of supply, and the price elasticity of demand, over time (short run versus long run). Be sure to state for each curve, whether either time frame is more (or less) price elastic. 5. In January 2011, the government intervened in the onion market to bring prices down to Rs 35. Why did the government intervene? Was this an attempt to enforce a price ceiling or a price floor? How did the government clear the market and who pays the price for the government’s intervention? 6. From question 5, should the government’s intervention continue as a long-run response to stabilizing prices in the domestic onion market, or is this more of a short-run solution? If this is more of a short- run solution, suggest a possible long-run solution. As mentioned in the opening section of this guideline, the sudden onset of the coronavirus earlier this year impacted several markets (domestic and globally) directly and indirectly. Some domestic markets have thrived, while others have stalled or declined. Furthermore, from March 2020, various government intervention (at the local, state, and federal levels) in some markets (for example, mandating that non- essential businesses close for a given time period, or placing restrictions on the number of people allowed in an enclosed area) have added to the market outcome observed. 1 According to Keshav Pailwar (2013), prior to December 2020, the domestic price of onion in India is on average, Rs 15 per kilogram. Although the market typically experiences seasonal fluctuations in the price, with the months of December and January having higher prices, the observed higher prices in that two-month period, 2010 – 2011, was significantly different from the previous two-month period, 2009 – 2010. 2 In India, consider that the period from October to January reflects a short run in the onion market. ECO 9730 Firms in a Global Economy 3 Although seemingly different, the case of the unusual high onion prices, the government’s response, and the resulting outcome provides a basic framework with which one can explore the market outcome for a given product traded domestically in the first three quarters of 2020. For the following two questions, consider a product (good or service) and its market that your team has observed prior to and during the past six months. 7. How has the coronavirus impacted this market? Describe the market outcome (in terms of price and quantity changes) in the last four to six months compared to the typical market outcome prior to March 2020. What possible combination(s) of changes in demand and supply would necessarily lead to the observed changes in the market outcome. 8. Did the government intervene in this market? If yes, describe the government’s intervention (mandate, quantity restriction, and/or price control) and the resulting or anticipated outcome from the government’s intervention. Who pays for the government intervention? If no, then discuss whether the government should have intervened in the market (and how). General Format Introduce the analysis by giving a summary about the domestic market for onions prior to December 2010. Questions 1 through to 4 continues the analysis with an exploration of the market during the two- month period, while questions 5 & 6 describe the market after the two-month period. A parallel discussion on the current market outcome of a product is presented with questions 7 and 8. These answers may be presented in an essay format that flows cohesively from the introduction, or the answers may be presented in a numbered format. The conclusion and final comments of the analysis may include the team’s answer to question 8. Additional resources may be used to support the group’s analysis. Formatting Instructions 1. The report should be in the following format: o no less than 3 pages and no more than 5 pages in length (excluding the bibliography) o 12 point Times New Roman font ● 1.5 line spacing and 1 inch margins 2. Remember to include any references used as part of the bibliography at the end of the report. The APA format is typically used for business research paper. ECO 9730 Firms in a Global Economy 4 References Colias, M. (2020, July 3). During COVID-19 Pandemic, the Used-Car Lot is Hot. The Wall Street Journal. https://www.wsj.com/articles/during-covid-19-pandemic-the-used-car-lot-is-hot-11593774001 Gasparro, A. & Kang, J. (2020, July 12). From Flour to Canned Soup, Coronavirus Surge Pressures Food Supplies. The Wall Street Journal. https://www.wsj.com/articles/coronavirus-surge-challenges-struggling- food-supply-chains-11594546200 Keshav Pailwar, V. (2013). India Shedding Tears over Onion Prices. Case study retrieved from Harvard Business School Publishing. McLaughin, K & Taylor, C. (2020, June 4). Coronavirus is Sending Luxury Rental Markets on a Rollercoaster Ride. The Wall Street Journal. https://www.wsj.com/articles/coronavirus-is-sending-luxury-rental-markets- on-a-rollercoaster-ride-11591287680?mod=searchresults&page=1&pos=6 Parker, W. (2020, March 22). Coronavirus Outbreak Pushes Local Governments to Freeze Home Evictions. The Wall Street Journal. https://www.wsj.com/articles/coronavirus-outbreak-pushes-local-governments- to-freeze-home-evictions-11584892859?mod=searchresults&page=1&pos=13 https://www.wsj.com/articles/during-covid-19-pandemic-the-used-car-lot-is-hot-11593774001 https://www.wsj.com/articles/coronavirus-surge-challenges-struggling-food-supply-chains-11594546200 https://www.wsj.com/articles/coronavirus-surge-challenges-struggling-food-supply-chains-11594546200 https://www.wsj.com/articles/coronavirus-is-sending-luxury-rental-markets-on-a-rollercoaster-ride-11591287680?mod=searchresults&page=1&pos=6 https://www.wsj.com/articles/coronavirus-is-sending-luxury-rental-markets-on-a-rollercoaster-ride-11591287680?mod=searchresults&page=1&pos=6 https://www.wsj.com/articles/coronavirus-outbreak-pushes-local-governments-to-freeze-home-evictions-11584892859?mod=searchresults&page=1&pos=13 https://www.wsj.com/articles/coronavirus-outbreak-pushes-local-governments-to-freeze-home-evictions-11584892859?mod=searchresults&page=1&pos=13 India Shedding Tears over Onion Prices Volume 11 Issue 2 June 2013 India Shedding Tears over Onion Prices Case prepared by Veena KESHAV PAILWAR1, 2 In the upscale restaurants of Delhi and Mumbai, Chefs are eschewing the onion, saying the price hike is eating up as much as 15 per cent of profits. … Mahendra Khairiya, chef at the upscale Kothi Mem restaurant in Delhi, raised eyebrows across the city by announcing pumpkin puree would replace onion gravy on his menu. Onion pickles have been scrapped entirely. – Stephanie Nolen, 2011 Lasalgaon is angry. …over 50 farmers … began hurling abuse at the media for making their lives miserable. “You people are responsible for this situation. Where were you when onion prices were 500 per quintal? Nobody talked of prices when we were struggling to recover our costs,” they shouted in a mix of Marathi and Hindi. “Everyone is talking of high prices but no one wants to mention that we have lost over half the crop and even at these high prices we will not make money,” another farmer politely told us. – M. Madhavan, 2011 With onion prices spiraling to 70-80 a kg, Prime Minister Manmohan Singh Tuesday demanded immediate action to deal with the crisis, but