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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.
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
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
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.
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: www.oup.com/elt/profile Photocopiable © Oxford University Press ...
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- Spring '10