Unstable markets and price volatility

Question 1

What are unstable markets?

Answer 1

Markets that have features which means the price may be too high, too low or too volatile to achieve a good outcome for social welfare

Question 2

What are the factors of price instability in markets influencing demand?

Answer 2

Globalisation

Urbanisation

Industrialisation

Geopolitical events and pandemics

Question 3

What are the cyclical factors of price instability in markets influencing demand?

Answer 3

Demand during growth/boom vs recession

Global growth cycle

Question 4

What are short term influences of price instability?

Answer 4

Speculation

Fluctuating exchange rates

Fluctuating interest rates

Question 5

What are key factors affecting supply which cause price instability?

Answer 5

Climate change

Unpredictable weather

Natural disasters

Geopolitical events and pandemics

Question 6

What are problems of price volatility for consumers?

Answer 6

Unpredictable food and energy prices

Reduces consumer confidence

May cause poverty/hardship when prices rise rapidly

Question 7

What are problems of price volatility for producers?

Answer 7

Unpredictable incomes

May be forced to leave when prices are low

May reduce investment and innovation

Question 8

What are examples of markets that often have volatile prices

Answer 8

Oil and energy markets

Agricultural markets

Livestock and meat