Case Study: Perfect Competition and Commodities

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Perfect Market Competition
Question one
Copper is a commodity in the metal category. It has a current market value of $2.74 (CNNBusiness 1). Copper has been behaving steadily in the market from October to May though with minimal fluctuations. However, this trend changed from June where it recorded the highest price of $3.3 and then fell to $2.5 in a span of one month (CNNBusiness 1). This went to September when it recorded the lowest market price at $2.6. Later the price rose to $2.8 where it has stabilized up to now.
Question Two
For thousands of years, Copper has been of great importance to humanity. Its characteristics have suited its applications in the industries and in many household appliances, and its ore is well distributed worldwide (Folger 1). There are two methods of extraction; open pit and underground mining. The price of copper is affected by factors such as the oil prices, the strength of the dollar, collateral demands from China, the extraction costs, and the unforeseeable occurrences (Folger 1).
Question Three
The choice for the new commodity is coffee. Coffee markets in Indonesia and Vietnam have sunk due to low stocks in both states; this is despite the improvement of the same worldwide (Nguyen, and Arifin 1). This market situation is attributed to the increase in coffee harvest flooding the market thereby lowering the prices of the commodity. The exports in Indonesia lowered due to decreased produce and an increase in domestic demand (Nguyen, and Arifin 1).

The same case is being witnessed in Vietnam and exporters are struggling to convince the farmers about the prices.
Question Four
The quality of the product does not vary significantly across the two states. There is a free entry in the business with little or minimum government interference. There is minimized spending in advertisement, and hence the coffee selling fits in a perfectly competitive market. However, the Coffee is having a large number of sellers and few buyers thereby neutralizing the status of a perfectly competitive market.
Works Cited
CNNBusiness. “Commodities – Oil, Silver And Gold Prices – Cnnmoney.” Money.Cnn.Com, 2018, https://money.cnn.com/data/commodities/?iid=MKT_Sub. Accessed 27 Oct 2018.
Folger, Jean. “Commodities: Platinum.” Investopedia, 2018, https://www.investopedia.com/university/commodities/commodities15.asp. Accessed 27 Oct 2018.
Nguyen, Mai, and Mas Alina Arifin. “Asia Coffee: Vietnam Quiet Despite Recovery In Global Prices;…”. U.S., 2018, https://www.reuters.com/article/asia-coffee/asia-coffee-vietnam-quiet-despite-recovery-in-global-prices-indonesia-premiums-tighten-idINKCN1ME18K. Accessed 27 Oct 2018.