Factors affecting copper demand, supply and equilibrium

Demand

The economic condition affects the quantity of copper demanded. When there is a downturn in the economy then the demand for copper goes down. The markets that use copper for different activities such as housing and construction will reduce their consumption due to financial distress in the economy. Hence, there will be a decrease in the quantity of copper demanded. As a result, the equilibrium quantity ceteris paribus will be reduced.

Prices of substitutes for copper affect the demand for copper. When the substitute prices are lower as compared to that of copper then consumers will shift to the substitute. The implication is that copper will be less preferred due to its higher price as compared to the substitute. Therefore, the quantity of copper demanded declines. The reduction results in a decrease in equilibrium quantity, maintaining other factors constant.

Prices of copper in the market affect the quantity demanded. High prices of copper discourage consumers from purchasing it. They will either decide to purchase a low quantity due to income effect or shift their consumption to substitute due to substitution effect. Consequently, there will be a reduction in copper demanded in the market. The equilibrium quantity also reduces in this case, ceteris paribus.

Changes in the quantity of copper demanded

Diagram showing changes in the quantity of copper demanded

From the diagram, when the demand for copper decreases from Q0 to Q2 the demand curve shifts towards the left that is from D0 to D2, the equilibrium point reduces from E0 to E2 and, the price decreases from P0 to P2 as shown in the diagram. The vice-versa happens when the demand for copper increases.

Supply

High-interest rate results in an increase in copper supply in the market. It emerges from the suppliers’ speculation that financial costs will increase in the market. Hence, the need to transact before an increase in the future financial cost makes their operation expensive. The copper stored in warehouses is likely to be released to cater to the speculated rise in financial costs, leading to an increase in copper supply. It results in a decrease in equilibrium quantity, ceteris paribus.

Strike by workers in the copper mines reduces the quantity of copper supplied. When workers in the copper mines boycotts work, then, the production of copper automatically decreases. Low supply occurs since the workers who are supposed to engage in the production of copper fail to attend to their excavation activities in the mines. Hence, copper remains unproduced and its supply diminishes. Therefore, the equilibrium point increases when other factors are maintained constant.

Unforeseen events interfere with copper supply. The events include earthquakes and other environmental factors that destroy copper quarries and disrupt mining activities. The interruption of the mining by these events results in the low production of copper. It implies that there will be a low supply of copper in the market-leading to an increase in the equilibrium point, holding other factors constant.

Prices of copper affect the quantity of copper supplied. Higher prices of copper encourage the companies to mine lower grades of copper that would not be economically feasible with lower prices in the market. It results in a high quantity of copper supplied in the market. An increase in supply results in a decrease in equilibrium point maintaining other factors at ceteris Paribas.

Changes in the quantity of copper supplied

Diagram showing changes in the quantity of copper supplied

A decrease in the quantity of copper supplied from Q to Q2 shifts the supply curve towards the left raises the equilibrium point from E to E2 and, increases the price from P to P2. The vice versa applies when the quantity supplied increases.

Higher prices of copper encourage the consumption of substitutes

When the price of copper increases, people prefer to consume the substitute of the product. Since substitutes are used for the same purpose, individuals would prefer to utilize the cheaper product. Hence, people will shift consumption to copper substitutes such as aluminum and coal which are cheaper. This is known as the substitutional effect.

Lessons from the factors affecting demand and supply of copper

The factors affecting the demand and supply of copper in the market interfere with the equilibrium point and the prices of copper. There is a need to put some regulations to correct the factors when they occur in order to stabilize the equilibrium in the markets to achieve perfect competition.

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NerdyTom. (2022, February 13). Factors affecting copper demand, supply and equilibrium. Retrieved from https://nerdytom.com/factors-affecting-copper-demand-supply-and-equilibrium/

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"Factors affecting copper demand, supply and equilibrium." NerdyTom, 13 Feb. 2022, nerdytom.com/factors-affecting-copper-demand-supply-and-equilibrium/.

1. NerdyTom. "Factors affecting copper demand, supply and equilibrium." February 13, 2022. https://nerdytom.com/factors-affecting-copper-demand-supply-and-equilibrium/.


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NerdyTom. "Factors affecting copper demand, supply and equilibrium." February 13, 2022. https://nerdytom.com/factors-affecting-copper-demand-supply-and-equilibrium/.

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NerdyTom. 2022. "Factors affecting copper demand, supply and equilibrium." February 13, 2022. https://nerdytom.com/factors-affecting-copper-demand-supply-and-equilibrium/.

References

NerdyTom. (2022) 'Factors affecting copper demand, supply and equilibrium'. 13 February.

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