Why do prices increase every Ramadan?

I

According to Macrotrends, the population of Dhaka is more than 22 million. The most common food that sells in Dhaka is eggs. Even if one in two people eats an egg every day, the daily demand for eggs is over 11 million.

We will revisit this in a different guise.

II

Why do prices of "essentials" increase in Ramadan? Print, online, and social media reminds you how goods are becoming more and more expensive. The government tries its best to keep prices in check. Yet, prices keep rising, or settle at a plateau that is difficult for many to reach.

What are the "essentials" in your basket? When do you want these "essentials"? You probably want them at iftar, dinner, and sehri. If you do not get them at these times, you would be sad.

The truth is, there are many like you who will want those same essentials and would be willing to pay to get them early or on time. There is a silent auction going on. On the other side of the market, sellers are aware there are many like you who demand that essential basket at a particular time. In an ideal Econ 101 world, the sellers arrive with that essential bundle. The market or equilibrium price is established. Alas! The real world is a bit more complex.

III

"Essentials" are important in our story. Price alone does not determine their demand. We need those essentials during Ramadan. We need them at a specific time, as mentioned above.

Even if the sellers supply in good spirit, supplying to a population of 22 million per day is a challenge. There is another problem: geographical location.

The population of Dhaka is scattered over a geographical space. Supply points are located at strategic positions. If there is a delay in getting the essentials to the supply points, prices will rise. If there is a shortage in predicting the right amount of, say, edible oil, prices may rise again.

So far, we have assumed that the actors in this "essential" drama are acting in good faith. There is no reason to presume they would do so beforehand.

IV

If suppliers can control supply at a strategic location, they can control the price during the month of Ramadan. People will buy their "essentials". They know this very well. This is where the government enters the story.

Governments are the moral fabric that protect citizens from outside coercion. Sadly, all governments have an upper limit in their capacity to check unethical practices. Dhaka is a city larger than many countries of the world. This makes it a big challenge for the government to keep prices of "essentials" in check during Ramadan.

V

 Price increase in Ramadan happens due to supply factors mentioned above. It also happens due to demand factors, because you and I are willing to pay to get our "essentials" basket on time. The moral issue of prices reaching a plateau that is too high for many families to reach is one that needs wider debate and awareness before it can be addressed effectively.

Asrar Chowdhury is a professor of Economics. He follows Test cricket, listens to music, and spins vinyls when he has free time. Email: asrarul@juniv.edu or asrarul@gmail.com