Th4.3: ^^ Volatility of Commodity Prices

Question 1

Primary products tend to have inelastic demand and supply curves, meaning…

Answer 1

relatively small changes in demand and price lead to huge fluctuations in price - doesn’t seem right do check

Question 2

What do these large changes in price result in?

Answer 2

means producer’s income and country’s earning also rapidly fluctuate, making it difficult to plan/carry out long term investment. producers can also see their income fall rapidly, causing poverty

Question 3

When prices of commodities rise for a number of years, there tends to be…

Answer 3

tends to be over-investment in the production of the commodity causing long term risk when the price eventually falls