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