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ECON 600 - Demand and Supply of Iron Ore in Australia Report

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Australian Catholic University

   

Economics And Finance For Business (ECO600)

   

Added on  2020-03-04

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The below-given report discusses the Demand and Supply of Iron ore in Australia. The document also discusses how Demand and Supply are correlated with each other. The law of demand postulates that a rise in the price of a good leads to a decline in its demand. On the other hand, the law of supply proposes that a rise in the price of a product brings about an increase in the quantity supplied of that product.

ECON 600 - Demand and Supply of Iron Ore in Australia Report

   

Australian Catholic University

   

Economics And Finance For Business (ECO600)

   Added on 2020-03-04

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Iron 1DEMAND AND SUPPLY OF IRON ORE IN AUSTRALIAStudent’s NameCourseProfessor’s NameUniversity(City) StateDate
ECON 600 - Demand and Supply of Iron Ore in Australia Report_1
Iron 2Demand and Supply of Iron Ore in AustraliaToday, iron is one of the most important resources in the world. Fundamentally, this isbecause the mineral is used in many industries as a raw material. Mainly, it is used inmanufacturing industries throughout Australia and the rest of the world. Today, the metal is amajor export product from the country. For this reason, any changes in its supply or demandsignificantly affect the performance of other industries in the economy. Over the recent past, theprice of the metal has been low. However, according to an article in the Business Insider, itsdemand, and hence the price of the metal is expected to rise. In the article “CBA says demand forAustralian iron ore and coking coal will continue to increase” the demand for the product isexpected to rise and meet its supply. It is imperative to note that the article may be useful to various stakeholders. Forinstance, the article may attract the interest of manufacturing companies who use iron as a rawmaterial in their production. In the same way, mining corporations may find the informationcontained in the article as useful. According to the news, the production of steel in the country isexpected to rise in the near future. Consequently, this implies that the demand for iron ore is alsoexpected to rise substantially since it is a main ingredient in the production of steel. In addition,the Australian government is also a key stakeholder in the mining industry. For this reason,government mining agents may take keen interest in the information provided in the article. Fundamentally, the information provided in the article can be explained in terms ofeconomic concepts and theory. According to economic theory the demand and supply of aproduct influences its price. The law of demand postulates that a rise in the price of a good leadsto a decline in its demand. On the other hand, the law of supply proposes that a rise in the price
ECON 600 - Demand and Supply of Iron Ore in Australia Report_2
Iron 3of a product brings about an increase in the quantity supplied of that product. However, somegoods such as iron have a low price elasticity of supply (Khan, n.d.). For that reason, asignificant increase in the price of iron brings about a less than proportionate increase in thequantity of iron ore supplied. From the article, the reader notes that the demand for iron ore in the country is expectedto rise in the near future. More precisely, the author predicts that Australian iron ore exports toChina will rise substantially (Pakiam, 2017). Notably, exports to China account forapproximately 80 percent of the country’s iron ore export production (Business Insider, 2017). Inaddition, the demand for Australia’s iron ore is expected to increase again this year (Monfort,2017). Furthermore, the demand from India is also projected to increase over time. Therefore, aseconomic theory suggests, the increase in quantity demanded for iron and its related productswill create an upward pressure on its price, forcing it to rise. Graph illustrating the effects of increasing in demand on priceSS1 P2 P1DD1DD2Q1 Q2 Quantity Demanded
ECON 600 - Demand and Supply of Iron Ore in Australia Report_3

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