Flashcards on Market Equilibrium and Price Transmission
Market Equilibrium & Price Transmission: A Student's Guide
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International food price transmission
3 cards
Card 1
Question: How does an increase in global wheat prices get transmitted to local bread prices in a country that imports wheat (e.g., South Africa importing ~45% f
Answer: Higher global wheat prices raise the cost of imported wheat inputs; millers and bakers face higher production costs, so they increase bread prices dom
Card 2
Question: Why can the increase in bread prices be smaller than the increase in global wheat prices?
Answer: Bread prices rise by less than wheat because bread includes other inputs and domestic value-added (processing, labor, other ingredients), and because
Card 3
Question: If global wheat prices cause bread prices to rise by 10% in South Africa but 15% in Zambia, what explains the different transmission rates between the
Answer: Different transmission rates arise from factors like different import shares of wheat, the extent of reliance on imported wheat, domestic supply condi