price volatility
DESCRIPTION
Unit 1 Micro RevisionTRANSCRIPT
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Price VolatilityUnit 1 Economics
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Examiners reward answers that provide
chains of reasoning
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These are good connective phrases
by contrast…
A consequence of this might be
…
therefore…
this might
mean… on the other hand…this is because
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Diagrams matter!
Diagram must havesFully labeledOriginal and new equilibriumDemand and supply the correct way round Well explained – you must explain why the
curve has shifted, in detailThink about the elasticity – e.g. oil has
inelastic demand and supply
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Why are prices volatile in the markets for many commodities?
Low Ped
Low Pes
Volatile Supply
Speculators
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Using analysis diagramsPrice
Quantity
Price
Quantity
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Using analysis diagramsPrice
Quantity
Price
Quantity
S1
D1
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Using analysis diagramsPrice
Quantity
Price
Quantity
S1
D1 D2
P1
P2
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Using analysis diagramsPrice
Quantity
Price
Quantity
S1
D1 D2
P1
P2S1
D1
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Using analysis diagramsPrice
Quantity
Price
Quantity
S1
D1 D2
P1
P2S1
D1
S2
P1
P2
RISE IN MARKET SUPPLYRISE IN MARKET DEMAND
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Problems arising from price volatilityRisk and Uncertainty• Uncertain incomes and profits• May limit investment by poorer farmers
Risk of poverty and unemployment• Millions of smaller farmers suffer • Many do not gain when world prices rise
Macroeconomic effects• Volatile export revenues affects the trade balance• High prices can cause inflation and food poverty