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Economics is the science which studies human behavior as a relationship between ends
and scarce means which have alternative uses. It is now considered a science purely of human
behavior in specific situations. Such an economic situation is one which is marked, on the one
hand, by multiple ends (wants and their satisfaction) and, on the other, by scarce or limited
resources (money, land, water, energy, capital etc.). This necessarily compels individuals to
economize and optimize; for instance, one attempts to maximize one¶s satisfaction, profits,
wages, salaries, etc. and minimize on one¶s resources (expenditure, cost of production and
effort). This is likely to ensure the best results for all economic activities.

According to our assignment µEconomic Framework for Business Development¶, I have

taken three products from three different places in India and have compared their prices. The
products that I have chosen are ± Mustard oil, basmati rice and Grapes from Pune, Mumbai and
Shillong respectively. The reason for selecting these products is because of their high demand in
the household level as well as these food products are used in many purposes. The products and
reasons for selecting these products are described below:

 

Mustard/Rapeseed oil is the third largest edible oil produced in the world after Soy oil
and Palm oil. At a production level of 13-14 million tons, it accounts for about 12% of the total
World¶s edible oil production. However the export trade has come down, due to the dominance
of other oils like palm and soya, which have become comparatively cheaper. The production and
consumption of this oil has been growing at the rate of 4.65% and 5.03% respectively
(compound growth over the last decade). Canada is the major exporter of seed and oil. Other
major producers like China, India and EU are large consumers themselves. On crushing rapeseed
or mustard, oil and meal are obtained. The average oil recovery from the seed is about 33%. The
remaining is obtained as cake, which is rich in proteins and is used as an animal feed ingredient.
 Ñ

In India, consumption of edible oil is substantial throughout the country. All Indian households
use it everyday. Various types of edible oils are available in the country for e.g. groundnut,
cottonseed, rapeseed, sunflower, mustard etc. Edible oils are made from respective oil seeds by
extraction process and there are some national as well as regional brands. The North-East region
of the country consumes mustard oil in large quantity. Oil is an integral part of the Indian palate
since long. India is perhaps the largest producer and consumer of different types of edible oils.
Preference for the type of edible oil differs from state to state, e.g. People from western India
prefer groundnut or cottonseed oil whereas South Indian states like coconut oil. The oil is also
used for massage purposes.

  


Basmati rice, known as the µKing of Rice¶ is the gift of India and Pakistan to the World.
Basmati rice is priced for its characteristic long-grain, subtle aroma and delicious taste. The grain
elongates on cooking giving it a characteristic grain shape and integrity. Basmati rice can be
equated with ³champagne´ among wines and µscotch¶ among whiskies. India is the largest
producer and exporter of basmati rice in the world. The annual production in the country hovers
at around 10-15 lakh tons a year, of which around two-thirds is exported. The remaining is
consumed, within the country. Basmati rice is grown exclusively in the northern part of Western
Punjab (on both sides of the Indo-Pakistan border), Haryana and Western Uttar Pradesh. Haryana
accounts for around 50% of the area under basmati rice in India, followed by Uttar Pradesh with
25% and Punjab with 18%. The productivity of basmati paddy in India is around 1400-2100 kg a
hectare against the yield of non-basmati paddy of 4500-500 kg a hectare.
In the international market rice is traded under two main categories such as Fragrant and
Non Fragrant. In case of fragrant rice, India dominates the trade with its Basmati Rice followed
by Pakistan. Basmati rice is the leading aromatic fine quality rice of the world trade and it
fetches good export price in the international markets. Basmati exports from India peak during
March-April period and the November-December period. Gulf region is the major market for
Indian basmati rice and inside Gulf, Saudi Arabia accounts for the major chunk of basmati
imports from India. European Union is the next important market for Indian basmati. The EU
buys roughly around 1-1.5 lakh tons of basmati rice on an average.
 Œ

 

Grapes are a juicy green fruits. It¶s very beneficial for our health and have been used
for treating metabolism disorders, liver, kidney and lung disorders and cardiovascular problems.
In India, Maharashtra occupies the top slot in grapes production in the country. It contributes to
about 80% of the total Indian grape production. Cultivation of grapes are extensively carried out
in the belts of Nasik, Pune, Sangli, Solapur, Satara, Ahmednagar, Latur, Beed and Aurangabad.
Harvest of grapes in Maharashtra commence in the middle of January and reach the peak during
the months of February and March. Fresh grapes can be stored in cold stores for a period of
about 6 weeks and the cold store grapes find way into the domestic markets during the months of
April and May The share of grapes production in India to the overall fruits production of 492.95
million tons is a mere 2.8%. Of the total grapes cultivated in the country µThomson¶ variety
(seedless) occupies the major portion with 55% of the total share.
There are various types of wines prepared from Grapes and are available in the world
like white wine, red wine, dessert wine etc. Red wine is popular in India. It is increasingly being
promoted as health drink as against other hard liquors like whisky or rum. Grape wine making is
gradually picking up especially in Maharashtra. Realising the potential of this industry, the
Maharashtra Industrial Development Corporation (MIDC) has established two wine parks under
the "Food Park" scheme of the Ministry of Food Processing Industry of the Govt. of India viz.
one at Palus near Miraj known as "Krishna Grape Wine Park" and the second one at Vinchur
near Nasik christened as "Godavari Valley Wine Park".
Globally grapes production contributes to about 16% of the total fruit production. Grapes
production occupies significance in the context that it is the third most widely cultivated fruit
after citrus and banana. Globally grapes production stood 67 million tons (2004) as per FAO
data. European Union takes the lead position in grapes production with Italy occupying the top
position with 13% followed by France with 11.2% and Spain 10.9%.
 º



      
The data are collected directly from the Shop¶s personnel in Pune where as data from Mumbai
and Shillong are collected over telephone through friends and relatives.

 
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Mustard oil Rs. 90 Pune 14/12/08

Raj Kamal Grains and Provision Store

Mustard oil Rs.90 Mumbai 14/12/08 Kalina, Santa Cruz East, Mumbai

Azad Lyngdoh Store,

Mustard oil Rs.80 Shillong 14/12/08 Laban, Shillong-4

 
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Basmati Rice Rs. 50 Pune 14/12/08

Raj Kamal Grains and Provision Store

Basmati Rice Rs.60 Mumbai 14/12/08 Kalina, Santa Cruz East, Mumbai

Azad Lyngdoh Store,

Basmati Rice Rs.65 Shillong 14/12/08 Laban, Shillong-4

 
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    "#  #  $%&$# $$
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Grape Rs. 60 Pune 17/12/08

Fruit Shop, Golden Star

Grape Rs. 70 Mumbai 17/12/08 Kalina, Santa Cruz East, Mumbai

Fruit Shop
Grape Rs.130 Shillong 17/12/08 Laitumkrah, Shillong-4

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From the Table-1 of Fig.-1, it is observed that the prices of Mustard oil in Pune and
Mumbai are same where as in Shillong it is different i.e., the prices in Pune and Mumbai is
Rs.90/liter where as in Shillong it is Rs.80/liter. Similarly, the prices of Basmati Rice and Grapes
showing in Table-2 & 3 respectively are different in different places.

  # +

The different or same price of the products in different places can be explained by the
economic analysis such as demand and supply, market structures and competition, etc.

Fig-2: Demand and Supply curve.

Supply and demand is an economic model describing effects on price and quantity in a
market. It predicts that in a competitive market, price will function to equalize the quantity
demanded by consumers, and the quantity supplied by producers, resulting in an economic
equilibrium of price and quantity. The model incorporates other factors changing equilibrium as
a shift of demand and/or supply. Supply and demand are said to be in balance or ³equilibrium´
when both buyers and sellers are willing to exchange the quantity "Q" at the price "P". When
there is a situation that the demand exceeds the supply the prices of the products rise because
there is very little products to satisfy the demand of the customers. The customers are willing to
 -

pay more and leave other consumers to pay more as well and prices rise. This imbalance
continues till the demand and supply comes to equilibrium. The opposite is when the supply
exceeds demand then prices fall.

Due to peculiar food habits and preparation methods, Indians use large quantities of
edible oils every day. With growing population, demand is increasing every year and the country
is importing semi-processed edible oils since long. The price of mustard oil in Pune and Mumbai
are same and different or higher than Shillong. This is because Pune and Mumbai are in the same
State (Maharashtra), therefore, people¶s demand and behavior towards a product is similar.
People of West and South India generally prefer Soya oil and Palm oil rather than Mustard oil.
Mustard oil is preferred as a cooking medium by the people of North-East region including
Assam. As per one estimate, there are more than 100 oil mills in Assam but even then mustard
seeds are sold to other states and mustard oil produced in other states is sold in Assam in ample
quantity. The prices in the country are largely dependent on the domestic production of mustard
seed as well as demand and supply.

Weather has profound influence production and monsoon plays key role in its production
and productivity. Since Basmati Rice has big export orientation, import demands from other
countries do affect price considerably. Overall sentiments in the rice market do affect Basmati
price trends. Government export import policy. Economic performance of importing countries
and other fragrant rice from other country too influence the market as well as domestic demand
and consumption pattern.

Fruits are mostly seasonal and the demand for the fruits are changes as per the
availability of the Fruits. During the season the fruit production is more and the demand for fruits
increases, thus causing the prices to come down and in the off season the fruits are expensive as
a result the demand goes down. For fruits there are no substitutes. Every fruit has is importance
and consumer has his own taste preference. The demand for aproduct also depends upon income
and preference of the buyer. The high price of Grapes in Shillong is due to low supply and high
demand and also due to the transaction/transportation cost.
 ´

Price trend analysis of Grapes across the major consumption markets indicates that the prices
tends to remain steady in the month of January and then gradually decline due to the supply pressure
and remain subdued till March after which prices tends to move on the higher side.

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The price of a product mainly depends on demand and supply and, therefore, varies in
different places. Prices are often high due to the clientele in the nearby vicinity. There is a cost
for everything. The high charges for products include the convenience, service conditions,
ambience and many other things. Findings have revealed the varying prices are influenced by
factors like weather/climatic condition, disposable income, demand and supply government
policies, substitute products etc.