Readers Question: What are the consequences for Ghana if it is dependent on primary products?
Definition of Primary products: Raw materials and resources used in the productive process. Examples include: metals, agricultural products and minerals.
Advantages of Producing Primary Products
- What Ghana will have a comparative advantage in producing
- Important source of export revenue
- Creates Jobs
Disadvantages of Relying on Primary Products
- Prices are Volatile due to inelastic demand. e.g a fall in price of primary product would lead to a fall in revenue.
- Limited resources. One day Ghana may run out of its primary products and the economy will be vulnerable to this lack of diversification
- Discourages investment in other aspects of the economy. Concentrating on primary products does not help the long term development of an economy because there is a lack of investment in other aspects such as education. Comparative advantage can change over time