ECN500: Managerial Economics

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1Demand and Supply in the Copper IndustryNolan Ivan G. EudinInternational American UniversityECN500: Managerial EconomicsDr James LottNovember 1, 2020
2Demand and Supply in the Copper IndustryThis is your introduction and thesis paragraph. The introduction should be about five orIn China, the need for copper has skyrocketed as the country’s property sector boomed.The red metal is used for a wide range of applications in engineering and construction,and is often viewed as a reliable indicator of global economic health.” (Tan, 2019).The Demand of Copper in ChinaIn 2011, the market demand for copper continued rising dramatically on the back ofremarkable growth in emerging market economies such as China. The prices for the red metalhas largely increased because of it’s seemingly insatiable demand in the Chinese market, evenreaching an all-time high at $4.62 per pound. As such, the market has quickly reacted to thisincrease in copper price which has caused the demand to start to decrease.However, with thediscovery of unreported stockpiles of copper being held by China’s manufacturing sectorwarehouses, it has put the country’s total stocks at 1.9 million tons (Farchy, 2011). Due to this,the copper supply is expected to increase which could push the prices of copper down.
3Figure 1Shift of Supply CurveNote.The supply curve shifts to the right, assuming all else constant, the quantity suppliedincreases. As such, the equilibrium price for copper decreases.The Global Economic DownturnCopper consumers had retaliated from the previous price hike of copper and beganseeking alternative substitute material. One of which was aluminium--cheaper and lighter thancopper--is benefiting most from substitution (Curtis, 2010). This has caused demand for copperto decrease in housing and construction markets, as well as other important markets. The adverseUS economic data, concerns over EU economic conditions and Chinese inflation had worriedanalysts due to the further decrease in prices of copper.
4Figure 2Shifting of Demand CurveNote.The demand curve shifts to the right, assuming all else constant, the quantity demandeddecreases. Therefore, the equilibrium price for copper also decreases.Sudden Changes in Copper PriceA decline in new claims for unemployment benefits during the summer of 2011 led to theincrease in copper prices. It was considered that any changes in unemployment could impactprices as copper is widely used in manufacturing and construction. Further, the metal’s extremevolatility has become much evident in September 2011 when the European Union has beenspeculated to expand its support of troubled banks in the union due to the financial crisis in theregion as well as when a report published by a Federal Reserve Bank of Chicago that shows anincrease in manufacturing output in the Midwest.
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