Primary Products: Advantages and Disadvantages

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

1. What Ghana will have a comparative advantage in producing
2. Important source of export revenue
3. Creates Jobs

Disadvantages of Relying on Primary Products

1. Prices are Volatile due to inelastic demand. e.g a fall in price of primary product would lead to a fall in revenue.
2. Limited resources. One day Ghana may run out of its primary products and the economy will be vulnerable to this lack of diversification
3. 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