Final answer:
Market prices are influenced by supply and demand rather than production costs. International companies might see prices fall below production costs due to excess supply. Over time, elasticity changes cause quantities traded to adjust more than prices.
Step-by-step explanation:
The fluctuations in international market prices can often be attributed to changes in supply and demand, rather than the cost of production. Such variations might cause prices to dip below production costs in the short term, as the market adjusts to these shifts. For instance, a local store's liquidation sale might offer goods for less than what it cost to produce them. Similarly, on a larger scale, international companies may experience a market-driven price drop when there's an excess of products like steel, computer chips, or machine tools.
In the long run, however, the quantities of goods traded often adjust more significantly than prices. The reason behind this is due to elasticity. In the short term, supply and demand are generally more inelastic, meaning their responsiveness to price changes is limited. As a result, even small shifts can lead to larger price fluctuations. Over time, as the market adapts and elasticity changes, the quantities traded can show greater variation.