The Factors that Lead to Instability of Product Price

1. 1 Qualifications of the study

Commodity price will influence the economy in a few countries on the globe. There are lots of factor that can cause the instability of commodity price. As we know commodity can be categorised as goods that demanded by the individuals. In the economical theory, if the demand greater than the source it can cause shortage, if this is happen the overall economy in the country will be instable. Regarding goods, there are several strategy to secure the price tag on commodity in order to be sure the purchase price is stable. For instance, change in exchanged rate, world political situation, inflation, global output, industrial creation and etc.

1. 2 Problem statement

Over many years, there are many experts make an examination about the factor that lead to instability of item price. Many of them discover a different idea through out their research about the instability of item price. That is important to a country to know very well what is actually the cause of this factor. Therefore, a research must be carry out to be able to know what is in fact the factor that lead to instability of commodity price.

1. 3 Research objectives

The research aims of this research the following

To determine the factor that lead to instability of product price.

To know the partnership between the factors toward the commodity price.

To identify the effect of commodity price.

1. 4 Scope and restriction of study

In order to complete the study of the analysis, I have collected trusted information from the web. Few publications have been chosen to get some good additional information. After that, in order to get the actual objectives want of the study, secondary data have been chosen. The limitation of this research is to find the best method that can perform this research which is hard to choose. You will discover methods can be used to know the factor that lead to instability of item price.

1. 5 Significance of the problem

By doing analysis on this analysis, we can reduce the risk of increasing product price because of the economic crisis. besides, we can determine the signoificant variables that effecting the commodity price. This research can also give benefits to administration because they can control the product prce basic on the economical condition.

2. 0 Books Review

Commodity can be defined as goods whereby it is demanded by the individuals. As we can see today, the price of commodity is currently increasing. For me, it may be due the price tag on resources that is also increasing. Therefore, we can say that the price of commodity is set wholly by the marketplace function. Item goods are consists of sugar, crude petrol, platinum, rice and etc. When the worthiness of commodity rises, the cost will increase as well.

There are some reasons that lead to the instability of the price of commodity. Thus, I have found out few reasons from knowledgable person that lead to the instability of the price

of commodity. A report of Frankel& Rose (2009), show that the price tag on commodity is influence by inflation and global productivity. It had been found that the relationship between the commodity and both the inflation and global result is positive. Furthermore, the microeconomic factors also affect the commodity price. For instance, inventories. Another evidence also shown that the inflation also impact the commodity price (Gospodinov & Ng, 2010). Following the unemployment space and oil price being governed, it was found that the price of 23 commodities were inspired by the inflation. Another study of Bower, Geis & Winkler (2007), also shown that the inflation and exchange rate also affect the price of commodity. On the other hand, the study of Pindyck & Rotemberg (1990), the macroeconomic impact affect the instability of price item, whereby, the industrial production and inflation will determine the future demand for product and can later affect the price of item. Thus, when the interest increase, the product price will lower.

However, the study of Bastourre, Carrera & Ibarlucia (2007) show a different take on what influence the product price. This is because, over time the Argentina item price is effect by the true interest rate, real exchange rate of United states and the demand of recycleables. Other different view regarding instability of commodity price is effect by predictions of conditional variance and conditional goals ideas (Laroque, 1997). The global financial conditions could also influenced the price of product whereby, in another research of Anzuin, Lombardi & pagano(2010), it was found that the monetary plan shock provided impact to the instability of product price.

In another type of review of Wescott & Hoffman (1999), it was discovered that the price of commodity just as corn and wheat were inspired by the agricultural policies, stockholding and government pricing support. When the agricultural policy manufacturer asked the producer to raise the price, then your commodity price need to be increased or vice versa.

According to Lalonde, Zhu & Demers (2003), it has shown that the globe economic activity and the effective exchange rate of US dollar business lead to influence the price of item. Thus, if the financial activity is lively, it may lead to increase in commodity price. Alternatively, relating to Tadesse & Guttormsen (2010) the periodic price threshold impact the instability of commodity price. When the price tag on threshold increase, the commodity price will increase as well.

After observing the resources, I came across several factors that lead to the instability of product price. Those factors contain inflation, exchange rate, interest, global output plus more. After figuring out all the factors, the theoretical construction can be sketched. Thus, the technique to be used can be indentified and hypotheses can be made after examining all the data.

2. 1 Theoretical framework


Exchange Rate The factor that lead to instability of commodity price

Interest rate

Global output

Theoretical framework is the area of the research including in research technique. Usually the network of association can be more clear explained the entire variable in the analysis. If we turn to the sketch above, there were independent adjustable on the kept side and centered adjustable on the right aspect. What is Individual and dependent variables? Separate is the variables that give itself, and reliant vice versa. From the sketch of theoretical platform above, we can easily see that the indie variable consist of four, inflation, exchange rate, interest and global outcome. The dependent variable is the factor that lead to instability of commodity price.


3. 1 Introduction

By using the supplementary data the factor that lead to instability of commodity price can be conducted. Secondary data can be define as the info that already are present by the prior researcher. The data is contain printed and unpublished material such as journal, article and etc. Through the data base, the secondary data can be gained. Thus, the methods for this evaluation are being used to complete the objectives of the research.

3. 2 Data, population and sampling method

In order to complete the study, the data can be collected from world bank and Bursa Malaysia. the populace is data is collected for Malaysian only. For the reason that this research is on product price in Malaysia.

In my view society is the group of men and women that lives jointly in certain area. The researcher can gain their information or data in that area in order to complete his research. For example, if the researcher want to research about academic dishonesty or plagiarism one of the students in UiTM Sabah, he must collect the info from the population in UiTM Sabah only. Alternatively, this research does in Malaysia so that the data collected must be suited because the info based on product price in Malaysia.

Sampling method is split into two which is probability sampling and non probability sampling. Employing this sampling method, researcher can lower a lot of time doing research and can also trim cost.

3. 3 Research of data

To estimate the data, the univariate modeling approach such as na‡ve development model, exponential smoofhing and lagragian model will be use.

3. 4 Hypothesis development

The hypothesis that can be concluded for this research is if the dependent variable such as inflation, exchange rate, interest and global result will results the instability of product price. The directional and the non directional hypothesis is the classification of hypothesis. The null and alternate hypothesis can either be turned down or accepted relative to the effect from the test of the parameters.

3. 5 Summary

Before conducting a study, we have two element that contain to be taken into consideration that is the data and methodology. It is better to be sure the option of data before one proceeds to do research. To gain an accurate effect for a research we should use proper methods. When data has already been gathered and examined, hypothesis may then be analyzed.

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