The paper "Iron Ore in Australia" is a perfect example of a micro and macroeconomic case study. The Mineral Exploration enterprise is forecast to decline in reference to its lifecycle. The Mineral Extraction industry is quite volatile. This is so as industry services demand depends on anticipated future demands and prices of commodities. For a long period, exploration activity matches minerals demand globally which is directly correlated to world economic growth. For the last five years, there have been increased exploration activities following strongly commodity prices increase and new mining activities expenditure.
Nevertheless, since then prices of many commodities have declined as well as new resources exploration incentives. To understand the overall economic contribution per industry Value Added (IVA) is applied. IVA can forecast future growth or decline of a commodity. IVA is seen to decline in the next decade to 2020-2021 at a 7.1% compounded rate. Therefore, the mineral extraction industry is seen to perform poorly with anticipated 2.6% real GDP per year in that period. This trend shows the nature of the declining industry. In the last five years, the frequency of ne industrial created has dramatically gone down following the commodity prices decrease and demand decline (IBISWorld’ s, 7). These fluctuations have not in general affected the mineral at large but, also specifically iron ore exploration in Australia.
Steel utilization during the developmental stages of a nation is significant to metallurgical coal and iron ore. In the process of steelmaking, metallurgical coal and iron ore are fundamental ingredients, thus steelmaking is seen to create demand for various primary elements Figure 1. Nevertheless, in the last half-decade in Australia compared to metallurgical coal iron ore has had tremendous growth and reduced market subjugation (Lawrence and Nehring, 474).
This report will focus on various microeconomic theories in reference to iron ore in Australia. Figure 1: Steel historical demand and supply intermediate input. From the chart, for many years demand remained high forcing supply movement along the vertical curve part. this means prices remained above production marginal cost including that of the highest producer. Supply and Demand curve The supply and demand curve theories are fundamentals of economic. The law believes in the movement of goods or services in reference to price.
IBIS World. Mineral Exploration in Australia. IBISWorld Indurty Risk Rating Report, 2016. Print.
Lawrence,K. and Nehring, M. “Market structure difference impacting Australian iron ore and metallurgical coal industries”. Minerals, 5(2015):473-487.
Reserve Bank of Australia. The Effect of Changes in Iron Ore Prices. 2015. [Web]. www.rba.gov.au/publications/smp/boxes/2015/feb/a.pdf, 5/18/2016.