Question

Madagascar's economy is focused on vanilla, while Saudi Arabia's economy is centered around oil. Why have these countries chosen to specialize in these particular products?

Answer 1

Answer:

Demand, non-elastic.

Explanation:

Although it may be hard to believe but natural vanilla from Madagascar can be quite expensive. A pound of vanilla is more costly than a pound of silver. Madagascar is responsable for almost 80% of the world´s vanilla production. As long as the demand for vanilla is pretty steady - not elastic in economic terms - prices are unlikely to fall much. This economic guarantee is the same for oil. So both countries continue to try to maintain their special position centering their economic efforts on a single product.