Table of Contents

1. Iron ore still has an important role to play in Australias economy ........................................ 2

1.1. Essence of the story .......................................................................................................... 2

1.2. Economic Analysis ........................................................................................................... 3

1.3. Explanation of the view: .................................................................................................. 6

1.4. Conclusion........................................................................................................................ 6

2. References ............................................................................................................................... 7

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 Demand and Supply of Iron Resources in
Australia
I have chosen a topic that is related to Demand and Supply of iron resources in Australia. The

title of the article selected is Iron ore still has an important role to play in Australias economy

and the article appeared in The conversation on Mar 21, 2017. This article was written by

Flavio Menezes. The evaluation of this article regarding to economic concepts is given below:

1. Iron ore still has an important role to play in Australias economy

1.1. Essence of the story

This article is centered on the demand and supply of iron ore and the impact of iron ore in the

economy of Australia. The author claims that Australia has been relying on its metals resources

in the past which is the second largest commodity market in the world after crude oil. According

to the article, Australia holds around 60% of share of Chinas iron imports and China is the

largest market for iron consumption. The author enlightens the issue of fluctuating prices of iron

ore in the international markets. The author states that despite the increase in prices forecasted by

World Bank in 2015, the prices of iron ore decreased heavily in 2016. He stated that the decrease

in price was due to the high supply of iron when the demand was very low. The author states that

the demand of iron ore is increasing in the Chinese market and Australia holds the most share of

Chinese market which is the key for growth in Australia. Now, the prices have increased once

again and this is due to the higher demand in the developing countries. The author of the article

also states that Australia is so successful in mining the metal resource is because it has the largest

mining industries which provide very low-cost metals. Australian metals are the cheapest in the

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world which makes it the first choice of metal demanders. This is why Australia has a high share

in metal resources.

1.2. Economic Analysis

This article can be explained through the economic concepts and theories. The most relevant

theories for this article would be the theory of demand and theory of supply. Theory of demand

is the demand side theory which states that there is an inverse relationship between demand and

price of a commodity. This means if the price of the commodity is increased, the demand of the

commodity will decrease and if the price of the commodity decreases, demand of the commodity

will increase. This case can be observed in the article where when the prices decreased in 2016,

the demand for the iron ore increased which caused the prices to rise again. This relationship can

be better understood by the graph given below:

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The demand curve is downward slope which shows that the relationship between demand and

price is negative. This means when one increases, the other decreases and vice versa.

Another most relevant theory related to this article is theory of supply which states that when the

supply of a commodity increases, its price also increases and when the supply decreases, its

supply also decreases. This case is also observed in this article when the price fall, the price of

the iron ore decreased and when it increased back, the prices also increased. This phenomenon is

shown in the graph given below:

The graph shows that there is a direct relationship between supply and price. When one

increases, the other also increases and vice versa.

After these two theories, the last theory that is related to this article is the law of supply and

demand. Law of supply and demand is centered on the idea that no matter what the condition is,

the supply and demand tends to come back to equilibrium position. This means that if supply is

greater than demand, it will not remain greater for a long period of time, the difference between

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the two will gradually decrease until the equilibrium point is achieved. Same will be the case

when demand will be greater than the supply. Nevertheless, whatever the situation is, the prices

tend to go back to the equilibrium position. This case can be observed in the article. First, there

was a rise in supply which anticipated that the prices will decrease but due to weak demand, the

price decreased. After some time, the demand increased due to low prices and the prices rose

again. This relationship can be explained by the graph given below:

The point where the price is $3 and the demand and supply is 300 units is called equilibrium

point. No matter what the situation is, demand and supply come back to the equilibrium point.

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 1.3. Explanation of the view:

The central idea of the law of supply and demand is that the demand for the commodities and the

supply of commodities pull each other towards each other until it reaches an equilibrium point.

This is because when the supply is high and the demand is low, the suppliers will decrease their

production to meet the demand of the commodity. One other factor here will be the price, when

the supply becomes high but the demand is low, the price will become lower. To increase the

price, suppliers will reduce the supply which will increase the demand of the project. When the

demand rises, the price will increase till the point when demand becomes higher than the supply.

When the demand becomes high, suppliers will increase the supply which will decrease the

prices and the demand and supply will come to equilibrium eventually.

1.4. Conclusion

This article is centered on the demand and supply of iron ore in the Australian market and the

impact of Iron ore demand on the economy of Australia. Author states that Australias economy

is dependent upon metal exports and the demand and supply of iron resources affect the

countrys economy. The article suggests that the demand of the iron ore will increase in the

Chinese markets and therefore, Australia can continue to rely on metal resources.

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 2. References

Menezes, F. (2017, March 21). Iron ore still has an important role to play in Australia's economy.

Retrieved August 25, 2017, from https://theconversation.com/iron-ore-still-has-an-

important-role-to-play-in-australias-economy-54476

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