2.5.6 (HL)—PED for primary commodities

Demand for primary commodities is generally more price inelastic than demand for manufactured products: a percentage price change tends to cause a smaller percentage change in commodity quantity demanded.

Primary inputs may be necessary for production, form a small share of the final product's price and have few close short-run substitutes. Manufactured products are often more differentiated and face more brands, models or alternative goods, making substitution easier.

Example

A food manufacturer may keep buying nearly the same quantity of a basic grain after a moderate price rise because reformulating production takes time, while consumers can switch more readily between competing manufactured snack brands.

This is a general tendency, not a rule for every product. Market definition, available substitutes, income share and time can make a particular commodity elastic or a manufactured good inelastic.

Do not infer export-revenue volatility without separately analysing supply shifts, PED and the percentage price and quantity changes.