Commodities and Inflation

Commodity

A basic good used in commerce that is interchangeable with other commodities of the same type

inputs in the production of other goods/services

What are commodities most often used as?

quality, uniform across producers

the ______ of a given commodity may differ slightly, but it is _______________________

food, energy and raw materials

When we speak about commodities in economics we tend to focus on:

oil prices we relatively stable in the lates 1980s to early 200s, but peaked in 2008 and fell drastically in 2009

Application for commodities

cost-push, since commodities are counted as capital

The prices of commodities are an example of ____________ inflation

weightings

• the importance placed by households on goods/services in an economy

• Used to work out an inflation index

goods/services that require the most commodity goods have the greatest weights by consumers

Why do the price of commodities have an even greater impact on inflation measurements than first thought?

imports come from outside the economy, placing it outside gov. jurisdiction

Why does the gov. struggle to control inflation caused by changes in prices of commodity goods?