Prices of primary commodities, such as agricultural crops, often experience significant volatility from year to year. Which of the following best explains why these large price fluctuations occur?
Both the price elasticity of demand and the price elasticity of supply are highly inelastic in the short run.
Both the price elasticity of demand and the price elasticity of supply are highly elastic in the short run.
The income elasticity of demand for primary commodities is highly negative in the long run.
The supply of primary commodities is highly price elastic in the short run due to biological lags.
256 exam-style questions on AQA A Level Economics 1.3 Price determination in a competitive market, covering 1.3.1 The determinants of the demand for goods and services, 1.3.2 Price, income and cross elasticities of demand, 1.3.3 The determinants of the supply of goods and services, 1.3.4 Price elasticity of supply, 1.3.5 The determination of equilibrium market prices, and 1.3.6 The interrelationship between markets. Each one has a worked solution and a mark scheme showing where the marks go.