How ped and pes of commodities affect producers, Microeconomics

How does the PED and PES of commodities affect producers in developing countries?

Explanation of PED (formulaic)

  • Definition of PED
  • outlining commodities as having low PED

a) few substitutes

b) low proportion of income spent on commodities

  • illustration of price fluctuations because of shift in inelastic supply and demand curves
  • how prices of commodities have fallen over the past 30 years

a)  Enhancing use of substitutes (rubber for example)

b)  leading to stagnant/decreased demand

c)  dependency of developing countries on commodities means that producers are price takers - and thus have an incentive to enhance output in order to enhance revenue, which enhances supply and lowers the price

 

Posted Date: 7/11/2013 3:57:51 AM | Location : United States







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