demand and supply

Demand And Supply Of Certain Resources In Australia

Demand And Supply Of Certain Resources In Australia And Factors Other Than Price Which Affects Demand And Supply

Question- How Demand and supply of certain resources in Australia and factors other than price which affect demand and supply?

Contents

Introduction

Mechanism of Demand and Supply

Analysis of demand and supply of certain resources of Australian Market:

Conclusion

References

Introduction

Demand and supply are two important tools of microeconomic analysis. Demand refers to how much quantity of a product is desired and purchased by a buyer at a given price level, where the supply of a product represents how much quantity of a product that a market can offer at a given price level. Demand and supply of a product depend on different factors. Demand for a product (suppose, X) depends on the price of that product (PX), price of the related commodities, consumers’ income, population or number of consumer, test and preferences of consumers etc., while supply of a product ( suppose, X), depends on the price of that product (PX), production – cost, price of production factors, future expectation about the price level etc. Before discussing about the demand and supply of certain resources in Australia and factors other than price which affect demand and supply, the mechanism of demand and supply in microeconomic analysis should be done.

 

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Mechanism of Demand and Supply

According to Marshal, all other factors that determine the demand of a product, remaining constant, if the price of the product increases, then demand will decrease and if the price decreases, demand will increase. That means there is a negative relationship between price and quantity demand. On the other hand, all other factors that determine the supply of a product, remaining constant, if the price of the product increases, then supply will rise and if the price decreases, then supply will fall. Hence, there is a positive relationship between price and supply of that product. If this demand and supply forces of the market can work freely, then we can get the equilibrium market demand at the equilibrium market price, where demand and supply of the product is equal. Therefore, demand and supply forces determine the market price in a free market economy, in the absence of government intervention (Pindyck and Rubinfeld, 2005). This can be shown in the following diagram of demand and supply (Figure: – 1). If there is excess demand in an economy, the price level will increase and with the increase in price level, suppliers will increase the supply, which will meet the demand at equilibrium level (Hyman, 1988).

Now, if other factors of demand except its own, price change, then the demand curve will shift to upward or downward. For example, if the income of an individual increase, then at the same price level demand will increase and demand curve will shift upward and if income decreases, then demand will fall and the demand curve will shift toward down as in figure:- 2. On the other hand, if other factors of supply except for its own price, change, then supply curve will shift towards up or down at the same price level (McTaggart, Findlay and Parkin, 2012). For example, if production cost of a product increases, then the supply will decrease and the supply curve will shift towards down and if the production cost decreases, then supply will increase and the supply curve will shift towards up, as shown in figure:- 3(Fernandez and Lagunoff, n.d.).

supply curv

Demand And Supply Of Certain Resources In Australia 1

Now, from the above analysis of demand and supply, the analysis of demand and supply of certain resources in Australia can be done as follows.

Analysis of demand and supply of certain resources of Australian Market:-

In Australia, there exist different resources like agricultural resource, mining resource, human resource etc. Though demand-supply analysis for these resources in Australia, is more or less same, but there exist slight differences between these analyses.  Though the demand-supply analysis for the agricultural sources is same as the above analysis, in case of mining resources and human resources, the demand-supply analysis is different (Abowd and Freeman, 1991). There exist some exogenous factors of the economy which bring different results in the demand-supply analysis of various resources of the economy (Anon, 2015).

For example, in the case of Eastern Australian Gas market, there exists an asymmetry of option in the demand-supply analysis. Before, the 1990s, the demand in Australian Gas market was not so high because of international market pressure, and not because of its price level. From the 1990s, due to the large scale development of export, both the demand and supply of Eastern Australian Gas market have increased throughout the phase of time. Now, if we consider, the case study of Bowen Surat gas fields in Australia, we can see that in next twelve years, the supply of LNG from this gas field was completely unavailable for the domestic market, though there was no common reason for fall in supply of LNG. This situation occurred completely due to an external reason. For these twelve years, all the gases produced in this field were fully contracted to LNG export. Though there was enough gas in the eastern reserve to meet the domestic supply and there was no shortage in demand zone, there was deficit supply of gases in the market (Musgrove and Stocks, 1985).

Again, if we concentrate on the mechanism of demand and supply of human resource of Australia, we can see that the demand for a human resource in the Australian market is excess than the supply of skilled labor, which results from a hike in the wage level of workers. But, in spite of this high wage-level, increased supply cannot meet the demand as there is a lack of skilled labor in the Australian market (Human Resource Management Australia, 1988)).

Conclusion

Hence, form the above analysis we can say that the demand and supply of any commodity, not only depends on the price level of the product, but also on some endogenous and exogenous factors.

References

Abowd, J. and Freeman, R. (1991).Immigration, trade, and the labor market. Chicago: University of Chicago Press.Anon, (2015).

Fernandez, J. and Lagunoff, R. (n.d.).Three Essays on Microeconomic Dynamics.

Human Resource Management Australia. (1988).Asia Pacific Journal of Human Resources, 26(1), pp.113-114.

Hyman, D. (1988).Modern microeconomics. Boston, MA: Irwin.

McTaggart, D., Findlay, C. and Parkin, M. (2012).Microeconomics. Frenchs Forest, N.S.W.: Pearson.

Human Resource Management Australia. (1988).Asia Pacific Journal of Human Resources, 26(1), pp.113-114.
Pindyck, R. and Rubinfeld, D. (2005).Microeconomics. Upper Saddle River, N.J.: Pearson Prentice Hall.
demand and supply
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