ABSTRACT
Short-term price changes may be classified into two broad groups: those determined mainly by changes in cost of production and those determined mainly by changes in demand. Generally speaking, changes in the prices of finished goods are ‘cost-determined’ while changes in the prices of raw materials inclusive of primary foodstuffs are ‘demand-determined.’ The prices of finished goods are affected, of course, by any ‘demand-determined’ changes in the prices of raw materials but it is through the channel of costs that this influence is transmitted.
