Question

For each of the situations, please determine whether the futures price of the commodity listed will increase or decrease Bolivia is an important producer for much of the world's lithium. Lithium is an important component in the production of lithium batteries, commonly used in many cell phones and laptop computers. If political tensions in Bolivia decrease and larger supplies of lithium are expectedMeteorologists predict an especially long winter in 2013 to be released, the price of lithium futures will likely Maple syrup is produced from the sap of maple trees. If the winter season is longer than usual and has freezing temperatures at night and warm temperatures during the day, more sap can be obtained from the maple trees with the freezing nights and warm days required for the increase in sap. As a result, the price of maple syrup futures decrease. will likely decrease. ' Assume that there is a large demand for Cuban bananas in the United States. Suppose that the President of the United States has signaled his/her intentions to lift the United States' trade embargo with Cuba within a year. In response to this new policy, the price of Cuban banana futures will Imagine that the United States Department of Agriculture announced that a new strain of avian bird flu has been discovered in several million Californian egg-laying chickens. As a result, the price of egg futures will likely not change. likely increase.

Answer 1

1. The price of lithium futures will likely decrease when its quantity supplied increases.

• As lithium is the most important component in the production of lithium batteries, its demand will certainly Increase if the political tensions in Bolivia decreases.
• Increased demand will motivate the lithium suppliers to increase their supply which will inturn decrease the price with the Increase in quantity.

2. The price of the maple syrup futures will likely decrease.

• Maple syrup is produced from the sap of the maple trees. Its production will be increased during winter seasons.
• If it is predicted that in 2013 the winter season will be longer than usual, the sap production will increase greatly.
• The increase in quantity of sap increases its supply.
• This will further lead to the decrease in the price of the maple syrup futures.

3. In response to this new policy, the price of Cuban banana futures will likely Increase.

• Trade embargo refers to the trade restriction put forward by the government inorder to restrict the trade of certain goods and services with foreign countries which may be in the form of trade barriers, tariffs etc.
• These trade restrictions Increases the price of any good which makes it impossible for other countries to trade with each other.

4. As a result of the avian bird flu in several Californian egg-laying chicken's, the price of egg futures will likely increase.

• Due to the increase in the number of effected poultaries, the people in US face shortage in the supply of eggs.
• The farmer's cut down the supply of eggs due to the rise in feed prices.
• When the supply decreases, the demand for eggs naturally Increases which further increases the price of egg futures.