Price Inelastic Demand = Demand is price inelastic when a change in price causes a smaller percentage change in demand. It occurs where there is a price elasticity of demand (PED) of less than one
Primary Commodity = Primary commodities are goods arising directly from the use of natural resources, or the factor of production ‘land’ Ex. Food and live animals, beverages and tobacco, excluding manufactured goods; crude materials, inedible, excluding fuels, synthetic fibres, waste and scrap; mineral fuels, lubricants and related materials, excluding petroleum products; animal and vegetable oils, fats and waxes.
Low price elasticity of demand, together with fluctuations in supply over short periods of time, creates serious problems for primary commodity producers, because they result in large fluctuations in primary commodity prices, and these
also affect producers’ incomes.
Reason 1 = Lack of close substitutes
Reason 2 = High degree of necessity
Reason 3 = Low proportion of income spent on primary commodities/ low price
Reason 4 = Primary commodity being more addictive
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