Explain why both the pes and ped tend to be inelastic, Microeconomics

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Explain why both the PES and PED tend to be inelastic in the short run for primary goods.

PED deals with (primarily) the ability and propensity of consumers to switch to other goods, which in turn deal with the availability of substitutes, the amount spent on the good and how income sensitive the good is. Taken together, in the SR, consumers are rather unwilling to switch to other goods when it comes to primary commodities, as are firms, which use such goods as factor inputs. PES deals with the availability and ease of switching to supplier substitutes, which in the SR is rather complex for commodity goods - because of seasonality of agricultural goods and the heavy investment often seen in mining for minerals.

 


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