Price change of aluminium
Task Set
Figure 1 below shows the price of aluminium over the past six years. It can be seen from Figure 1 that the price of aluminium has fluctuated a great deal during this period. For example: between July 2008 and February 2009 the price fell by 57%; in August 2009 alone the price rose by 16%. In an essay of 1500 words or fewer, use economic analysis to explain changes in the price of aluminium over the period shown in Figure 1 and why the price fluctuations have been so great.
Figure 1: The monthly LME spot price for aluminium in USD per tonne between June 2008 and June 2014
Aluminium is a relatively soft, lightweight metal. It is a good conductor of heat and electricity as well as resistant to corrosion, making aluminium suitable for a variety of industries such as transportation, construction and power lines. Due to its presence in several markets, aluminium prices are subject to various external forces as well as other substitute markets ' conditions. From the graph reflecting the price changes of aluminium there are three important changes happening in this period that will be mentioned in this report. In order to explain these price changes the supply and demand for aluminium has to be analyzed.
Demand and supply are important because as demand or supply conditions change the price will adjust to bring about a new equilibrium price and quantity” (Gillespie,2014). Demand and supply are also important because they help us to understand the market. The price changes can additionally be an indication of the elasticity of aluminium and how elastic it is at the certain time periods and so we can see how sensitive the consumers are to the price impacts.
The demand for a product is the quantity that customers are able and willing to buy. The demand curve is downward sloping because for a higher quantity to be demanded the price must be lower because the extra satisfaction (marginal utility) is less ,according to the law of diminishing marginal utility.
Figure 1 below shows the price of aluminium over the past six years. It can be seen from Figure 1 that the price of aluminium has fluctuated a great deal during this period. For example: between July 2008 and February 2009 the price fell by 57%; in August 2009 alone the price rose by 16%. In an essay of 1500 words or fewer, use economic analysis to explain changes in the price of aluminium over the period shown in Figure 1 and why the price fluctuations have been so great.
Figure 1: The monthly LME spot price for aluminium in USD per tonne between June 2008 and June 2014
Aluminium is a relatively soft, lightweight metal. It is a good conductor of heat and electricity as well as resistant to corrosion, making aluminium suitable for a variety of industries such as transportation, construction and power lines. Due to its presence in several markets, aluminium prices are subject to various external forces as well as other substitute markets ' conditions. From the graph reflecting the price changes of aluminium there are three important changes happening in this period that will be mentioned in this report. In order to explain these price changes the supply and demand for aluminium has to be analyzed.
Demand and supply are important because as demand or supply conditions change the price will adjust to bring about a new equilibrium price and quantity” (Gillespie,2014). Demand and supply are also important because they help us to understand the market. The price changes can additionally be an indication of the elasticity of aluminium and how elastic it is at the certain time periods and so we can see how sensitive the consumers are to the price impacts.
The demand for a product is the quantity that customers are able and willing to buy. The demand curve is downward sloping because for a higher quantity to be demanded the price must be lower because the extra satisfaction (marginal utility) is less ,according to the law of diminishing marginal utility.
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