Price Volatility

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Unit 1 Micro Revision

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Price Volatility

  1. 1. Price VolatilityUnit 1 Economics
  2. 2. Examiners rewardanswers that providechains ofreasoning
  3. 3. These are good connective phrasesby contrast…A consequence ofthis might be …therefore…this mightmean…on the otherhand…this is because
  4. 4. Diagrams matter!Diagram must havesFully labeledOriginal and new equilibriumDemand and supply the correct way roundWell explained – you must explain why thecurve has shifted, in detailThink about the elasticity – e.g. oil hasinelastic demand and supply
  5. 5. Why are prices volatile in the marketsfor many commodities?LowPedLowPesVolatileSupplySpeculators
  6. 6. Using analysis diagramsPriceQuantityPriceQuantity
  7. 7. Using analysis diagramsPriceQuantityPriceQuantityS1D1
  8. 8. Using analysis diagramsPriceQuantityPriceQuantityS1D1 D2P1P2
  9. 9. Using analysis diagramsPriceQuantityPriceQuantityS1D1 D2P1P2S1D1
  10. 10. Using analysis diagramsPriceQuantityPriceQuantityS1D1 D2P1P2S1D1S2P1P2
  11. 11. Problems arising from price volatilityRisk and Uncertainty• Uncertain incomes and profits• May limit investment by poorer farmersRisk of poverty and unemployment• Millions of smaller farmers suffer• Many do not gain when world prices riseMacroeconomic effects• Volatile export revenues affects the trade balance• High prices can cause inflation and food poverty

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