Are 138 - Are 138 Whitney Winter 2009 International trade in commodities Zach Brian stats 100b guy gay guy victor from 155 eric wu goth girl 1

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Are 138 Whitney Winter 2009 International trade in commodities Zach Brian, stats 100b guy gay guy, victor from 155 eric wu goth girl 1. Primary commodities, what are they and why study them? a. Def: Refer to tangible goods that are: i. Derived from the land or sea ii. Unprocessed or only slightly processed iii. Most are used in the production of other goods (inputs) 1. “primary” refers to first stage in production a. Ex. wheat is a primary good b. It’s ground into flour- intermediate good i. Bc you don’t usually consume flour raw c. Bread is the final good. iv. In this class we’ll focus on the primary goods. b. A few commodities are used in primary form (bananas, fresh fish for sushi) 2. We’ll focus on ag, forestry, fisheries and mining. (4 areas) 3. Characteristics of Primary Commodities a. Their production depends on the natural endowments of a region/country. Aka it’s from the land. i. Ex. climate/soil/wildlife/mineral deposits b. Production tends to be specific to certain locations. i. These natural attributes are specific to locations, you can’t just manufacture wherever you like. Ex. you can’t produce uranium anywhere like you can produce toys. 4. Factors of production are either mobile or immobile. a. Labor and capital aren’t perfectly mobile i. Labor- immigration barriers if jobs open up overseas 1. But in terms of industries, if certain industries are successful, over time labor will flow to that industry. ii. Capital- avocados can’t be grown in CA bc they freeze. 5. Market implications a. Creates a strong interest for trade since factors are not perfectly mobile i. Ex. cooler climates will produce apples, grain, cold weather lumber, salmon ii. Tropical climates produce: bananas, coffee, tuna 6. Supplies of many commodities are subject to random shocks like natural disasters a. Ex. freezes, droughts, diseases, population fluctuations,
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b. Problem right now, there are populations of fisheries are just going down, down and down. c. As a result of these shocks, there is variability in supply. You may plant stuff and expect Q = 600 or so but depending on events, it’s out of your control. 7. Commodities tend to be homogeneous goods, aka you can’t tell the difference between them. a. They don’t tend to have brands. Not branded. There are different qualities and there are different grades of these products but they are still classified under a generic category. i. The classic is #2 corn. You don’t need to know what farm it came from. You know what you’re getting. b. This has implications in the market i. Unless the government/trade group steps in and creates a noncompetitive structure like a cartel, most of these commodity markets will tend to be highly competitive. ii.
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This note was uploaded on 04/11/2009 for the course ARE 138 taught by Professor Staff during the Winter '08 term at UC Davis.

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Are 138 - Are 138 Whitney Winter 2009 International trade in commodities Zach Brian stats 100b guy gay guy victor from 155 eric wu goth girl 1

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