Question

4) How might companies such as Mars and nestle react to an increase in the price of sugar?

Answer 1

The companies like Mars and Nestle are heavily dependent on sugar as an input. Mars Incorporated produces a lot of chocolate, food candy, and pet care product. Almost all of them have some amount of sugar in them. Similarly, Nestle, a Swiss company is known for its chocolates and other sweet products all over the world.  

If the price of the sugar increased the input and production cost of these companies will also increase. At a higher input cost, these companies have to use more resources to produce the same amount of goods they are producing right now. They will be forced to increase the price of the goods they are producing or it will reduce their profit margin.

Conclusion: If the input cost increases the firms respond by increasing the prices of their goods or profit margin declines they can't function longer at a lower profit, so ultimately the increase in the price of inputs result in an increased price of the product.