Question

QUESTION 3

Australia is one of the major exporters of iron ore as one of its resources. However, there are many other producers of iron ore in the world. Suppose the price of iron ore is set in an internationally competitive market.

(a) Due to a major demand shock in China, the demand for iron ore by China increased significantly. However, at the same time some mines in Africa closed

down due to production issues. Explain how would the market equilibrium price and quantity for this product change internationally?

(b) Based on the answer you provided for part (a) what would be the new market equilibrium in Australia?

(c) What would be the effects on the macroeconomy of Australia as a result of this change in the iron ore market?

Answer 1

Answer:
a) When the demand for iron mineral by China expanded essentially, at that point the request bend for iron metal shifts to the correct and the same time, which result in increment in amount demanded and cost a few mines in Africa closed due to production issue which cause diminish in supply of iron metal at all cost levels and thus supply bend will move to the cleared out which result in increment in cost and diminish in harmony amount and net impact of these two events will be advance rise within the balance cost of iron mineral and diminish in amount demanded.

b) The modern showcase balance will be at higher cost than unique equilibrium cost and diminished in amount requested since the world cost of iron mineral is increased and so due to rise in cost there's a diminish in amount demanded in Australia as well.

c) The macroeconomy of Australia as a result of this alter is that there's diminish in their trades due to higher cost of iron mineral universally and hence net send out will diminish

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