Question

MBA 5010 Week 3 Weekly Integrative Assignment

Copper and zinc work equally well as a chemical catalyst to mitigate pollution created in the production of lithium batteries. However, copper is currently 10% more expensive than zinc. And so, zinc is the current preferred material. The following diagrams represent the copper, zinc, and lithium battery markets.

However, some recent advances in pharmaceutical research have substantially increased demand for zinc in pharmaceutical manufacturing.

Using this example, explain how markets see to the most appropriate allocation of resources between competing uses. Limit your response to no more than 500 words. Be sure to include in your response the preceding diagrams, demonstrating the relevant change in each respective market. You may use Word drawing features or draw the diagrams, use your phone to capture them, and then insert them into your response. If you need help, ask. Your answer will be evaluated based on correctness, completeness, and clarity. Be attentive to your writing.

Answer 1

We know that, Zinc is preferred as a catalyst over copper because of its low price . At this moment, there is a steady demand for Zinc and that is certainly more than that of Copper .

The breakthrough research in pharmaceutical industries have increased the demand for Zinc which means that the equilibrium demand and the price increases too. The firms will still prefer Zinc over Copper only as long as Zinc is priced below copper, or from the question, the equilibrium price of Zinc.

If the equilibrium price of zinc goes past that of copper, then firms will automatically choose the cheaper alternative that of Copper. Hence, the overall demand for Zinc after this point falls. Now as a result of this, the demand for copper begins to increase. In short you can assume this scenario to be a slightly tweaked version of a Bertrand equilibrium. The firms will keep on substituting both of these chemicals alternatively depending on the market price as both have demonstrated the same efficiency in acting as a catalysis, and the prices of these raw materials will be reflected directly on the prices of lithium batteries.