Primary Product Dependency | A-Level Economics Model Paragraph (AQA, Edexcel, OCR)
- many developing countries rely on exporting primary products to generate income
- this is a barrier to economic development because
- the prices of primary products are volatile - due to sudden changes in the factors of demand and supply e.g. weather
- this can impact farmers' incomes and government tax revenues
- this means people will not have the ability to improve their health and education
- which is fundamental to the development of an economy
- A* point
- Terms of trade refer to the ratio of export prices to import prices. A deterioration means that a country has to export more to import the same amount of goods.
- the Prebisch-Singer hypothesis suggests that the prices of primary goods (such as raw materials and agricultural products) usually stay low or fall whilst the prices of manufactured goods increases over time
- those producing manufactured goods can benefit from economies of scale such as better technology - which you can't get with primary products which rely on a fixed amount of land
- primary products are also inelastic in YED - as incomes increase, demand for fruit etc. stays the same, whereas the demand for manufactured goods e.g. phones/ cars increases.
- those who produce primary products as main source of income will fall behind and this will increase inequality within countries and between countries
Further Support
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