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Managerial Economics

Notes As the Indian production is below the demand, the country continues the import of both
nutmeg and mace. Much of the imports are by the oleoresin industry, they said. During
2008-09, India imported 1,325 tonnes of nutmeg valid at 25.37 crore and 265 tonnes of
mace worth 8.46 crore, they said. At the same time, the country has exported an estimated
3,275 tonnes of nutmeg and mace worth 91.87 crore. A good chunk of the Indian exports
of this commodity is value-added items such as oleoresins, oil and in powdered form,
they said.
Nutmeg and mace, their oleoresins and essential oils are used in the food and beverage
industries. Although whole nutmeg is available, ground nutmeg is more popular. The
ground form is mainly used in the food processing industry, extraction industry sources
said.

Nutmeg is a standard seasoning in many Dutch dishes. Nutmeg and its oleoresin are used
in the preparation of meat products, soups, sauces, baked foods, confectioneries, puddings,
seasoning of meat and vegetables, to flavour milk dishes and punches. The fleshy outer
cover of the fruit is crystallised or pickled or made into jellies, they said.
Mace is sold either whole or as ground spice and is used in savoury dishes. It is used to
flavour milk-based sauces and processed meats such as sausages. Soups, pickles and ketchup,
pickles and chutneys are also seasoned with mace. Because of its aroma, the essential oil is
used as a natural flavouring extract and is employed for flavouring food products and
liquors. Nutmeg oil and mace oil are used mainly in flavouring soft drinks, canned foods
and meat products.

Nutmeg oil is used in cosmetics, men's perfume and toiletries due to its aromatic properties.
Mace oil possesses almost identical "physico-chemical" and "organoleptic" properties as
nutmeg oil. Mace oil is also used to a limited extent in perfumes and soaps. They are used
in the pharmaceutical industries also, industry sources told Business Line.
Nutmeg is produced in the tropical areas of Indonesia and the West Indies. The world
production of nutmeg is about 25,000 tonnes a year. The global demand is also estimated
at around this level, they said.
The production of mace is about 3,000 tonnes. Indonesia and Grenada dominate production
and export both products with a world market share of 75 per cent and 20 per cent
respectively. The other producing countries include India, Malaysia, Papua New Guinea,
Sri Lanka and a few Caribbean islands.
Source: www.thehindubusinessline.com

3.2 Market Equilibrium

Price is determined in a free market by the interaction of supply and demand. We can underline
three dynamic laws of supply and demand.
1. When quantity demanded is greater than quantity supplied, prices tend to rise; when
quantity supplied is greater than quantity demanded, prices tend to fall.

2. In a market, larger the difference between quantity supplied and quantity demanded, the
greater the pressure on prices to rise (if there is excess demand) or fall (if there is excess
supply).

3. When quantity supplied equals quantity demanded, prices have no tendency to change.
Price theory answers the question of interaction of demand and supply to determine price in a
competitive market. Let’s see an example, give in Table 3.1.

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