Economics and International Trade : Assignment

0ECONOMICS
Economics and International Trade
By (Name)
Course
Instructor’s Name
Institutional Affiliation
The City and State
The Date

1ECONOMICS
Table of Contents
Introduction...............................................................................................3
Background.................................................................................................................3
Market structure of the industry.....................................................................4
Factors that influence demand for the industry’s product....................................5
Factors that influence supply of the industry’s product(s)....................................5
Elasticity...................................................................................................6
Impacts of an event on the industry................................................................7
Conclusion................................................................................................8
References................................................................................................9
Appendix.................................................................................................10

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Introduction
Australian regards mining as an important contributor and primary industry in its
economy. As of 2018, there was a general increase in mining production to a level of
6.10 percent. The average mineral production in Australia from 1978 to the year
2018 stands at a rate of 4.97 percent. Australia experienced the highest level of
mineral production in the year 1987 standing at a rate of 25.20 percent and in the
year 1986 it registered the lowest record of mineral production at a level of negative
16.90 percent. From the period of 1974-2018 the total average gross product from
mining stands at AUD Million 15254.40. The highest level of GDP from mining was
experienced in the year 2018 standing at a level of AUD Million 36287 and in the
year 1974 is when the lowest level of GDP from the mining industry was experienced
at a level of AUD Million 5144. Therefore the overall total contribution of mining to
the Australian economy stands at a rate of 5.6 percent of the Gross domestic
product (Maria et al 2013,pp 30). In regards to Australian exports, the overall total
contribution of minerals stands at a rate of thirty five percent. Globally, Australia is
being regarded as the world leading coal, Zirconium, Zinc, Rutile and iron ore
exporter. It is also the second leading uranium and gold exporter and aluminum third
world leading exporter (Hall 2014, pp 20).
Background
The main exporter of Australian mineral products in the 1990's was Japan. Over a
quarter millions of Australians derive their livelihood from the mining industry.
However, the mining importance in Australia does not mean that a number of people
are employed in the sector (Austmine 2013, pp 15). The mining sector employs an
estimated total of 129,000 individuals which is just 2.2 percent of the overall
Australian total workforce. Recent statistics show that the overall 8.8 percent of
Australian growth value in the year 2017 was a result of mining which higher than
that of the period between 1994 and 1995 by eighty seven percent. The main mining
companies in Australia include among others Rio Tinto and BHP Billiton (Bartos
2007, pp 149). Therefore it basing upon this background that this paper shall provide
a comprehensive analysis and overview of the mining industry market structure,
two determinants of demand, and two determinants of supply for mining products,
demand elasticity for the mining product and the recent event with a substantial
impact on the mining industry.
Analysis of the market structure and its characteristics
Iron ore (oligopoly market structure)
For this section of the paper, iron ore will be used as representative product when
analyzing the market structure of the mining industry. The Australian iron ore
industry is oligopolistic by its very nature. Majority of the share market is possessed
by FMG, BHP and Rio Tinto. There characteristics of monopolistic behavior in the
market (Boudreau-Trudel et al 2014, pp 31). A as result of lower unit costs and
improved productivity the above firms sit comfortably on the lost cost due curve. Low
cost units is brought about by reductions in service and goods expenses through
low or reduced volumes and prices , high levels of productivity in terms of labor ,
minimizing over head costs, maximizing unit productivity and utilization of suppliers
in the emerging markets. It is clear that there well positioning on the cost curve of the
market which will further become flat over time by many Australian miners with
further improvements in technology and cost cutting initiatives.
The average variable costs of production for every mine determine the costs curves .
Ground support consumables, the costs of transportation, processing costs,
royalties, fuel are the main costs variable production costs. More so, the industry is