Demand and Supply of Certain Resources †Free Samples to Students

Question: Discuss about the Demand and Supply of Certain Resources. Answer: Introduction In todays economy, Australia is considered as one of a developed economy in the world. It is also considered as one of the largest mixed market economies of the country. In terms of wealth per adult, Australia is a second-best wealthiest country after Switzerland (Shann, 2016). In this report, we will analyze demand and supply of steel in Australia. There are various factors that affected the supply and demand of steel in Australia. In this project report, we will evaluate these factors and evaluate future of Australian steel market. Demand is the number of goods and services that consumers are willing and able to purchase in an open market. Only willingness to purchase is not sufficient, the consumer should have the purchasing power to make such purchase. Law of demand states that if the price of commodity increases than the demand for such commodity will decrease and vice versa. For example, if the price of particular car increases than the consumer will avoid such car and will go toward another car with similar features. There are various factors that can, directly and indirectly, affect the demand for product and services. These factors are the price of the commodity, the price of substitute commodity, income of consumer, purchasing power of the consumer, changing preference of consumer, etc. There are certain goods on which law of demand is not applicable, for example, demand of luxury goods will increase with an increase in price as its symbol of a reputation for an individual (Varian, 2014). Supply is the number of goods and services which are available in the market for consumption of consumer. Law of supply in microeconomics state that if the price of a commodity increase then the supply of such commodity will also increase and vice versa. For example, if the manufacturer of steel expects that price of steel is expected to increase then he will produce more steel in order to make more profits. Hence we can say that relationship between price and supply of goods is positive. This law is based on the assumption that other factors such as the price of the alternative commodity, technology, government policy etc. remain constant. Another important concept which we have to understand in microeconomics in relation to demand and supply is market equilibrium. It is a state of the market in which market demand and market supply are equal. It is represented by following graphical presentation (Baumol and Blinder, 2015). We have understood the basic concept of demand and supply, now we can proceed to analyze demand and supply of steel in the Australian market. Economic analysis There are various resources in which economy of a country is dependent upon such as agriculture resources, human resources, financial resources, natural resources etc. all of these resources is very important for development and growth of a country. The scarcity of excessive resources can hamper the state of the economy of a country. In Australian market demand for steel is less as compared to its demand. Between 1990s to early 2000s, Australia was one of the biggest exporters of steel. The maximum amount of steel produced in Australia was exported to China. During this period China was in its development stage and requires a lot of iron ore and steel for capital and infrastructure development. Hence the demand for iron ore and steel was very high and their supply was not sufficient to meet such demand. They have to import to fulfill such demands and Australia was their biggest supplier (Hudson Sadler, 2017). During the last decade economy of China has become one of the strongest economies in the world. They are out of their development stage and no longer require such a large amount of steel and iron ore. It can be said that steel requirements in China are at its peak and there are various indicators to justify such statement. The current population of China is very high and it is expected that rate of population will decline in near future. There are various social laws implemented by the government of China for population control. Current rate of urbanization is also very low. Both of these factors show that requirement of steel in future will be less (Yellishetty Mudd, 2014). According to Vice-chairman of the China Iron and Steel Association, China is making strict rules to cut down excessive production activities. This initiative is taken to control air pollution in the country which is at its peak. He also stated that due to increases international prices of steel in 2017, chine has increased in-house production of steel. Iron ore production in the country has increased by 15 % in last two months. However, some of the economists have said that demand for Australian steel in the global market will keep on increasing. Some economists think that demand for steel will not decrease in China. According to world steel association, total production of steel in March 2017 is at its maximum. It has increased by 5.7% as compared to first quarter of 2016 (Sainidis, 2017). According to them, China's steel demand is expected to increase by 4-5 % in 2017. Also, India is in its development stage and demand of steel and iron ore will increase in future. It is expected that India will become the biggest importer of coking coal and steel from Australia in near future. Conclusion In near future, it is believed that Australian steel market will more dependent on the domestic market as compared to its exports. This domestic consumption will contribute more toward economic development as compared to the export of steel. Without demand in domestic market, there are chances of an oversupply of steel in the Australian market. In the international market, the chances of steel demand are less likely. The major reason behind this is decreasing in demand for steel in China. But some of the economists have expressed their views stating that demand for Australian steel will increase due to development activities in India. This picture will become clearer in the first quarter of 2018. The government of Australia should take steps to support producers of steel in the country. They should provide subsidies and other benefits to them to ease them during this down market. References Baumol, W.J. and Blinder, A.S., 2015.Microeconomics: Principles and policy. Cengage Learning. Hudson, R. and Sadler, D., 2017.The international steel industry: restructuring, state policies and localities. Routledge. Sainidis, E., 2017. Severstal: growth and consolidation strategies management in a turbulent global steel industry. Shann, E., 2016.An Economic History of Australia. Cambridge University Press. Varian, H.R., 2014.Intermediate Microeconomics: A Modern Approach: Ninth International Student Edition. WW Norton Company. Yellishetty, M. and Mudd, G.M., 2014. Substance flow analysis of steel and long term sustainability of iron ore resources in Australia, Brazil, China and India.Journal of cleaner production,84, pp.400-410.