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HI5003 - Economics for Business - Assignment

   

Added on  2020-03-01

5 Pages1349 Words49 Views
Economics For BusinessDemand and Supply for UraniumStudent Id:

ECONOMICS FOR BUSINESSIntroductionCurrently, there is an immense amount of hue and cry with regards to global warming andhence the global focus is on generation of clean energy which would not only fuel the futureeconomic growth but would also address the issue of environmental pollution. One of thesolutions in this regard relates to the use of uranium for generating nuclear energy which doesnot result in greenhouse emissions. Considering Australian exports of uranium, it is one ofthe critical resources that the nation has. However, in the last two to three years, the price ofuranium has plummeted which has caused havoc for the uranium mining industry (Green,2016). The objective of the given report is to analyse the recent fall in uranium prices withreference to economic theory and the potential outlook for future in uranium prices.DiscussionIn accordance with the theory of demand and supply, the equilibrium price of an underlyingproduct or commodity is determined by the relative demand supply forces and the demandsupply gap that tends to exist. These forces are particularly critical for commodities as thereare market driven prices for various grades of the underlying mineral. Considering thedemand supply situation, the price of these commodities tends to vary in real time and thusimpacts the dynamics of the mining industry (Mankiw, 2014). There has been a severe fall in the uranium prices which have reached a 13 year low in 2014.The key factor responsible for the same is the Fukushima disaster which raised questionmarks over the underlying safety of nuclear energy. The sentiments were severely dampenedwhen one of the technologically advanced nations such as Japan had to suffer a meltdown. Asa result, a negative propaganda has begun which has led to the termination of existing nuclearplants and delay with regards to construction of new ones. A case in point is Japan whichafter this indicated closed down all the 48 operational nuclear reactors (FOE, 2013).The developed countries were quick to take a decision in regards to nuclear plants phase outin the favour of renewable sources of energy which is particularly true for European countriesparticularly Netherlands and Germany. Prior to this incident, these nations had sizablegeneration of electricity in the form of nuclear power, but migration from nuclear energymeant fall in demand of uranium by these nations. In the developing world, there are safetyconcerns which has given rise to protests which has stalled the construction of new nuclearplants which would adversely impact future demand (Green, 2014). 1

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