price volatility
DESCRIPTION
Unit 1 Micro RevisionTRANSCRIPT
Price VolatilityUnit 1 Economics
Examiners reward answers that provide
chains of reasoning
These are good connective phrases
by contrast…
A consequence of this might be
…
therefore…
this might
mean… on the other hand…this is because
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
Why are prices volatile in the markets for many commodities?
Low Ped
Low Pes
Volatile Supply
Speculators
Using analysis diagramsPrice
Quantity
Price
Quantity
Using analysis diagramsPrice
Quantity
Price
Quantity
S1
D1
Using analysis diagramsPrice
Quantity
Price
Quantity
S1
D1 D2
P1
P2
Using analysis diagramsPrice
Quantity
Price
Quantity
S1
D1 D2
P1
P2S1
D1
Using analysis diagramsPrice
Quantity
Price
Quantity
S1
D1 D2
P1
P2S1
D1
S2
P1
P2
RISE IN MARKET SUPPLYRISE IN MARKET DEMAND
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
