If Speculators Expect the Future Price of a Commodity to Rise

question 37

Essay

If speculators expect the future price of a commodity to rise, they may decide to use the "buy low, sell high" strategy in which they buy the commodity at a low price today in order that they may sell it later when prices rise. How might their actions actually cause a self-fulfilling prophecy in the short run? Use a demand and supply graph in your answer.

---

Definitions:

Matching Capacity

Matching capacity involves adjusting a company's production capacity to meet forecasted demand, ensuring efficient use of resources.

Activity-Based Costing

An accounting method that assigns overhead and indirect costs to related products and services by identifying cost drivers.

Machine-Hours

Machine-Hours measure the amount of time machines are in operation during a certain period, often used for allocating machine-related expenses to products.

Activity Cost Pools

A method in cost accounting where costs are accumulated according to the activities that incur them.