The commodity market

What does commodity mean?

Natural resources: things you dig up or grow

What commodities are price inelastic?

Demand for agricultural goods (soft commodities) e.g corn, barley and wheat tends to be price inelastic because they are necessities for most people

What is the supply of soft commodities?

Supply tends to be inelastic as supply cannot easily be altered once crops are sown- in periods of bad weather, supply can be severely affected (shifts to the left) which forces prices up

What is the supply of hard commodities?

Hard commodities are raw materials- supply of hard materials is relatively inelastic due to the time taken to find and extract deposits from mines

What is a reason why commodity markets tend to be volatile?

Due to the actions of speculators who buy and sell commodities ok order to make a profit and exchange rate changes

Why can demand change in a recession?

Firms may produce less and then demand for raw materials fall

Why does the supply of commodities tend to be price inelastic in the short run?

• hard= due to the time taken to find and extract deposits for mines

• Soft= due to the time that it takes for crops to grow

Why does the demand of commodities tend to be price inelastic in the short run?

There is no close substitutes, they are necessities

Why is prices of commodities being volatile a problem for some countries?

If countries depend on exporting natural resources such as copper or cocoa