Question

4. Study Question #4 Ch 7. Why are developing nations concerned with commodity price stabilization? Check all that apply. Improving terms of trade threaten the growth of importing nations. There are high price elasticities of supply and demand for many commodities. Developing economies are often highly dependent on the export of just one or a few commodities. There are low price elasticities of supply and demand for many commodities.

Answer 1

Answer:

Developing nations are concerned with commodity price stabilization because of the following reasons

1. There are high price elasticity of supply and demand for many commodities
2. Developing economies are often highly dependent on the export of just one or a few commodities.

Explanation:

In recent decades there has been growing concern about the sharp fluctuations of primary product prices, the effects of those fluctuations on particular groups of producers and particular countries, and the measures which might be taken to reduce or offset the fluctuations.

Producing countries have been dominated by proposals for stabilizing world prices of commodities, in particular via the establishment of a “Common Fund” within the framework of UNCTAD's Integrated Program for Commodities.

However, developing nations are concerned with commodity price stabilization because of the two reasons provided above which could result in inflation and deflation.