2638867
Description
Mind Map by mikapolivotti, updated more than 1 year ago
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Created by mikapolivotti
over 9 years ago
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To what extent is P.P.D a constraint
on economic growth &
development in developing countries?
- Primary Product Dependency
- A Nation that relies
on the export of 1 or 2
primary products for
the majority of its
FOREX earnings,
leaving it vulnerable
to fluctuating world
prices
- Primary Products can be divided into hard commodities
- Copper
- Tin
- Iron
- Copper
- Soft Commodities
- Agricultural Crops: Wheat, Palm Oil, Rice and Fruit
- Agricultural Crops: Wheat, Palm Oil, Rice and Fruit
- A Nation that relies
on the export of 1 or 2
primary products for
the majority of its
FOREX earnings,
leaving it vulnerable
to fluctuating world
prices
- Issues w/ PPD
- Price Fluctuations
- Given thier PES and PED,
any demand-side or
supply-side shock will result
in a significant price change
- Given thier PES and PED,
any demand-side or
supply-side shock will result
in a significant price change
- Fluctuations in producers' incomes
and foreign exchange earnings
- since demand in price
inelastic, then a fall in price
will cause total revenue to
fall and in turn, the foreign
currency earning from
exports to fall
- since demand in price
inelastic, then a fall in price
will cause total revenue to
fall and in turn, the foreign
currency earning from
exports to fall
- Difficulty of planning investment & output
- the price fluctuations cause uncertainty
which is a detterent to investment.
- the price fluctuations cause uncertainty
which is a detterent to investment.
- Natural Disasters
- extreme weather such as
hurricanes, tornadoes,
droughts and tsunamis can
cause severe distruption to
production of primary
products, especially
agricultural products
- extreme weather such as
hurricanes, tornadoes,
droughts and tsunamis can
cause severe distruption to
production of primary
products, especially
agricultural products
- Protectionism by developed countries
- EX: The huge subsidies
given to US cotton farmers
have created great
difficulties for Indian cotton
farmers, who are unable to
compete; the EU's Common
Agricultiral Poliy has meant
that there is no free acess
to European markets for
food from developing
ocuntries.
- EX: The huge subsidies
given to US cotton farmers
have created great
difficulties for Indian cotton
farmers, who are unable to
compete; the EU's Common
Agricultiral Poliy has meant
that there is no free acess
to European markets for
food from developing
ocuntries.
- Low YED for Primary Products
- Prebisch Singer Hypothesis
states that terms of trade
between primary products
and manufactured goods tend
to detiriorate over time
- Prebisch Singer Hypothesis
states that terms of trade
between primary products
and manufactured goods tend
to detiriorate over time
- Price Fluctuations
- Evaluation
- Less Economically Developed Countries (LEDCs)
have comparative advantage in primary
products
- Demand may be income elastic
- Diamonds (Botswana)
- Oil (Nigeria)
- Gold (Ghana)
- Diamonds (Botswana)
- Sustainability
- i.e. in the L-run if
resources are
non-renewable,
economic growth in
unlikely to be
sustainable
- i.e. in the L-run if
resources are
non-renewable,
economic growth in
unlikely to be
sustainable
- Eval. for Prebisch-Singer
- Some countries have
developed on the basis of
their primary products,
ex. Botswana w/ their
diamonds
- if a developing
country has a
comparative
advantage in a
primary product then
its resources will be
used more efficiently
by specialising in the
production of that
product
- Primary product prices
rose sharply until mid 2008
while the prices of
manufactured goods were
falling
- Some countries have
developed on the basis of
their primary products,
ex. Botswana w/ their
diamonds
- Less Economically Developed Countries (LEDCs)
have comparative advantage in primary
products
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