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Demand and Supply of Iron Ore in Australia - Fundamental Concepts in Economics

   

Added on  2020-03-02

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Running head: DEMAND AND SUPPLY OF IRON ORE IN AUSTRALIA1Demand and Supply of Iron Ore in AustraliaName of the StudentName of the OrganizationAuthor’s Note

DEMAND AND SUPPLY OF IRON ORE IN AUSTRALIA2IntroductionOne of the fundamental concepts in economics related to demand and supply which isused to determine not only the equilibrium price but also equilibrium quantity of a given product.When there is an increase in the demand of the underlying product, then the price tends toincrease and so does the consumption assuming that supply in the short run remains constant.Similarly, the decrease in demand would lead to fall in the prices assuming no alteration insupply (Mankiw, 2014). This concept would be applied to the most critical export of Australiai.e. iron ore and explanation would be offered with regards to decrease in price of iron ore whichhas been witnessed in the last couple of years. The underlying economic concept and the iron oreprice movement would be discussed in the form of a report.Demand and Supply MechanismThe demand curve for normal goods tends to be sloping downward on account of theinverse relationship with price while an opposite trend is observed for supply which tends to varyproportionally with price. The point at which there is meeting of the two curves (i.e. demand andsupply) tends to provide the equilibrium point. It is imperative to note that the changes indemand and supply curve may arise due to non-price factors as well besides price. When thenon-price factors are at play, there is shifting of the demand and supply curves. For instance, theincrease in demand leads to right shifting of the demand curve while decrease in demand leads toleft shifting of the demand curve. This is captured graphically as highlighted below (Nicholson,& Snyder, 2014).

SupplySupplyDemandDemandDemandSupplySupplyDemandDEMAND AND SUPPLY OF IRON ORE IN AUSTRALIA3Similarly, the increase in supply leads to downward shifting of the supply curve while decreasein supply leads to upward shifting of the supply curve. This is captured graphically ashighlighted below (Mankiw, 2014).

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