Price Volatility In Markets

Question 1

Which markets tend to be volatile

Answer 1

Markets where the conditions of supply and demand are stable from year to year where the price elasticity of demand and the elasticity of supply are both high.

Question 2

Products with unstable conditions of supply and demand will experience price fluctuations

Answer 2

E.g. many products have seasonal variations in demand which causes prices to rise sharply at peak times and then fall back during the off-peak periods

Question 3

What are the main causes of price volatility in markets

Answer 3

Low PED
Low PES in the short run
Volatile Market Supply
Speculators (buying and selling to amplify price changes)

Question 4

Examples of volatile prices

Answer 4

World sugar price has been falling in recent years.
Due to stronger supply helped by favourable weather conditions.
Demand has slowed due to health concerns.