Copper Data Response

1)     a) Demand: The quantity of a good or service that consumers are willing and able to purchase at a given price in a given time period.

      b) Economic growth: The rise of real national income per capita   and measure of Gross Domestic Product (GDP).

2)     One possible reason for the increase in copper prices is the higher demand in copper.  In the article, it states, “demand from China has been the main driving force behind the recovery of copper prices…” It makes sense that there would be more demand since there are construction projects and the Shanghai expo project. Not to mention the huge rates of economic growth allow Chinese consumers to buy more electronic appliances that are built with copper to function.

Since there is a higher demand for copper, this means the demand curve would shift to the right. How would this make the price rise? If you look at the diagram below you see a demand curve and a supply curve. Following the rule of ceteris parabus, when demand shifts to the right the supply curve does not move. As you can see in the diagram:

-          ‘D’ shifts to the right and ‘D1’ is created which is the new demand curve

-          ‘S’ is the supply curve, which does not move.

-          Where ‘D’ and ‘S’ intersect is the equilibrium which determines ‘P1’ (Price) and ‘Q1’ (Quantity)

-          However when the demand curve shifts, equilibrium is lost and the market has to reach equilibrium again

-          Where ‘D1’ and ‘S’ intersect is the new equilibrium which creates ‘P2’ (Price) and ‘Q2’ (Quantity)

-          As you can see, both the price and quantity have incremented due to a higher demand in copper.

This shows one possible reason for the increase in copper prices.

3)     The price of consumer goods such as a new washing machine might be expected to rise due to the ascent in price of copper. This is an example of the non-price determinant, cost of factors of production. The article states, “Copper prices on the London Metal Exchange hit $8,009.75 a tonne in early trading…” This shows that copper is more expensive. Thus companies have to buy more copper at a higher price.  What does this mean?

Since copper is at a higher price, this means the supply curve would shift to the left. How would this make consumer goods prices raise? If you look at the diagram below you see a demand curve and a supply curve. Following the rule of ceteris parabus, when supply shifts to the left the demand curve does not move. As you can see in the diagram:

-          ‘S’ shifts to the left and ‘S1’ is created which is the new supply curve

-          ‘D’ is the demand curve, which does not move.

-          Where ‘S’ and ‘D’ intersect is the equilibrium which determines ‘P1’ (Price) and ‘Q1’ (Quantity)

-          However when the supply curve shifts, equilibrium is lost and the market has to reach equilibrium again

-          Where ‘S1’ and ‘D’ intersect is the new equilibrium which creates ‘P2’ (Price) and ‘Q2’ (Quantity)

As you can see, the price has incremented but the quantity demanded has decreased. Hence the price of consumer goods such as a new washing machine might be expected to rise. This is due to the fact that the price of copper has risen.

In the text, there is evidence to why copper prices may increase or decrease. The extract also shows us why demand could increment or decline. What is likely to happen in the copper market in the coming months?

4)     Many argue that the copper market is going to go down hill due to the fact that China is the country supporting the copper market and China is not going to need copper soon. This means copper demand is going to fall and prices would fall. Projects such as the “Shanghai Expo” is due to finish soon and therefore copper demand would most definitely drop.

Nevertheless, the text does say that "demand for new washing machines, fridges and other products that need copper" implying that copper is going to be needed for the new appliances that are going to be used in the new buildings.

Personally, I believe that the price of copper is going to drop but not plummet. Since the projects are finishing, this means the demand for copper is going to fall. But with new electrical appliances needed, that is going to give a little boost to help the copper market. Therefore, there is going to be some type of balance that allows the copper market to continue to flow but not at the pace that it is at the moment of the article.