Why Are Materials That Represent Only a Small Percentage of the Total

question 30

Essay

Why are materials that represent only a small percentage of the total cost of manufacturing a product more likely to have inelastic demand than major components?

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Definitions:

Cyclical Stock

Stocks whose prices are affected by macroeconomic or systemic changes in the overall economy, usually exhibiting high volatility in line with the business cycle.

Countercyclical Stock

A stock whose performance is inversely related to the economy's performance, often doing well during economic downturns.

U.S. Treasury Bills

Short-term government securities issued at a discount from par value and mature in a year or less, representing a secure debt obligation of the US government.

Risk Level

A measure of the potential for loss in an investment or business venture.