supplyanddemand - ProFile 3 UNIT 6 Supply and demand The...

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Unformatted text preview: ProFile 3 UNIT 6 Supply and demand The price of goods emerges from the market according to their demand and supply. In times of shortages there will always be people who try to take advantage of the situation. Ticket touts (US scalpers), are much loathed for their efforts to sell tickets for events over the box-office price. Though we should remember that a stockbroker who does the same is considered a shrewd businessman. COMMODITY PRICES In recent years, the price of commodities has soared, largely because of the arrival of China as a formidable industrial power. This has seen the increase in the price not only of oil, copper, and steel but also materials not traditionally in short supply, such as cardboard. Even plastic, in the form of granules, now features on the commodities exchange. When prices of commodities rise, it may become worthwhile to exploit resources which are less accessible. A rise in oil prices will make drilling off-shore a more viable proposition. A rise in copper will encourage companies to mine even deeper. SPECULATION by death. The South African company, De Beers, has a virtual monopoly on diamond production. In other businesses an oligopoly can be said to exist, where a few companies or countries control the supply of a commodity or product. CARTELS Cartels occur when producers band together to regulate production and hence the price of a commodity. In some instances, suppliers can dictate the price of commodities to buyers. OPEC, the Organization of the Petroleum Exporting Countries is the most famous of these, and has wielded a great deal of power. Price hikes of oil in the early 1970s and beyond produced what have become known as ‘oil shocks’. POWER OF MULTINATIONALS In many instances, however, it is not a cartel of producers which can dictate prices, but rather a handful of extremely powerful multinational companies who play one producing country off against another. This is particularly true for producers of cocoa, coffee, and cane sugar. Sometimes there are attempts to ‘corner the market’, i.e. buy the entire supply of a particular commodity so that the price can then be dictated. MONOPOLIES Governments are very sensitive about the growth of monopolies or the rise of suppliers to near-monopoly holder status. Monopolies are considered anti-competitive. This has not stopped governments from holding lucrative monopolies of their own such as salt, tobacco, and postal services. When a country has a monopoly, it guards it jealously. The Chinese managed to keep the secret of silk production for centuries until eggs were smuggled out of the country by monks, a crime punishable See the ProFile Student’s site: Photocopiable © Oxford University Press ...
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