Demand & Supply of Resources in Australia-Free-Samples for Students

Question: Discuss about the Demand and Supply of Certain Resources in Australia. Answer: Availability of resources is the basics for production activity in the economy. Rich a nation is natural resources greater is the scope for economic growth of the nation. Sometimes despite having, plenty of natural resources country often lags behind the expected growth. An example o such nation is Africa. Because of inability to extract the resources, the resources remain unutilized. Therefore, proper resource management is crucial. In the paper, demand supply management of resources in Australia is discussed. Summary highlights of the story Agricultural, mineral and human resources are basis for Australian production activity. The analysis of primary resource is similar to general analysis. However, special attention needed for mineral and human resources. In the stock of mineral resources, Australia encounters problem in the domestic availability of natural gas. Natural gas is used as a primary raw material in power plants. With a lack of supply of basic raw materials, power production is hampered. Contraction in power supply increase price of electricity causing suffering to domestic household. The problem is supply shortage is although created by large suppliers of LNG. This is the main discussion topic of the article chosen for present analysis (dailytelegraph.com.au 2017). The main force for supply shortage is the large-scale export of LNG. The international market is a more lucrative place for business. A large share of natural gas was previously supplied by Queensland alone. With growing attention to export, more than 58% of supplied gas is now exported to big exporters like Shell, Origin and Santos (Lodhia et al. 2013). This contributes to mismatch between supply and demand in the domestic target. In Australia, most of the power plants are directed to use natural gas that coal keeping in mind the clean energy target of the state. In this situation if the main resource for power generation are used for meeting external demand then there is an obvious supply crisis. Given the demand, the restricted supply increases price largely. Despite paying a high price people in Australia cannot be secured with a undisturbed power supply. Record suggest that domestic price for natural gas increased by 57% in the last two years (Giurco et al. 2014). In the report, prediction for a future supply shortage is also predicted for some major states in Australia. These states include New South Wales, Victoria and South Australia. Another reason for high price in the energy market is the movement of major suppliers as a cartel. They do so to stay in the international market by recovering their loss at the cost of domestic producers. Economic theories and concept The problem that Australia is facing is directly connected with common economic problem of lack of supply to meet the demand and resulted high price. Balance between supply and demand is an important condition for smooth functioning of free market. Demand defines buyers willingness to pay for a good in the market. Suppliers take their decision about how much quantity they are willing to supply in the market (Ali et al. 2017). The parity between buyers and suppliers decision determine the state of the market. In case where there is mismatch between these, two the price will be either higher or lower than the price prevail under free market condition. When there is a reduction in supply, then this is indicated by an inward shift in the supply curve. However, demand cannot respond so quickly and in case of necessary good demand does not change at all. To serve large number of consumers with a limited supply, price increases rapidly. This is preciously what is happening is Australian mar ket. Figure 1: effects of an inward shift in the supply curve (Source: Rader 2014) Before 1990, the position of Australia in international market is not so strong. As a result, domestic resources are used only for meeting domestic demand. there was no problem in the power sector . Both coal and natural gas were used to supply power for domestic and industrial use. With economic progress, international relation strengthens and gives a boost to export. The export of LNG increases (Moran and Kunz 2014). Many of the suppliers completely restrict their domestic supply and only engage in exportation. Individual decision of some suppliers resulted in a nationwide shortage of power and blackout becomes more frequent. Another economic theory that needs to be evaluated is the impact of cartel in the market. Oligopoly sellers are often interested in forming a cartel in order to enjoy a greater control in the market (Currie, Peel and Peters 2016). Two or more large player in the market jointly takes the decision regarding price and output. The firm having high production cost may supply a small quantity whereas firm having low cost supplies a greater quantity. Industry as a whole has the joint supply and the firms enjoy equal industrial profit. In case of Australia, suppliers form cartel to set a high price. The price in domestic market is often higher than that in the international market (Rader 2014). Recommendation The present problem of mineral resource in Australia is the existing supply shortage and high price. Regulation should be made to control price. Traditional methods like setting a price ceiling may be one strategy. Another strategy to reduce price is to increase domestic supply by reducing export. Government can impose a quota an export. Supply excess of domestic demand should only be allowed for export. Instead of depending only on natural gas, alternative sources for fuelling power plants should be encouraged. Use of modern emission efficient technology is one way out in this regard. Conclusion The paper analyses demand and supply situation for mineral resources in Australia. There is high mismatch between supply and demand in this industry. Supply fall short of demand resulting in a high price. Increase in export is one reason for supply shortage. Close down of old plants is another factor contributing to lack of power supply. Consumers are exposed to high price and frequent blackouts. Regulation needs to be made to correct the situation. Suppliers should give priority to domestic demand first. The problem, if not solved quickly then can become even bigger and prevent economic progress. References Ali, S.H., Giurco, D., Arndt, N., Nickless, E., Brown, G., Demetriades, A., Durrheim, R., Enriquez, M.A., Kinnaird, J., Littleboy, A. and Meinert, L.D., 2017. Mineral supply for sustainable development requires resource governance.Nature,543(7645), pp.367-372. Currie, D., Peel, D. and Peters, W. eds., 2016.Microeconomic Analysis (Routledge Revivals): Essays in Microeconomics and Economic Development. Routledge. Dailytelegraph.com.au. (2017).Gas shortages could cause NSW blackouts. [online] Available at: https://www.dailytelegraph.com.au/news/nsw/nsw-energy-crisis-gas-shortages-could-trigger-widespread-blackouts/news-story/ce7284fa5bfe589215c57ea3d3d4d77b [Accessed 24 Aug. 2017]. Giurco, D., Littleboy, A., Boyle, T., Fyfe, J. and White, S., 2014. Circular economy: questions for responsible minerals, additive manufacturing and recycling of metals.Resources,3(2), pp.432-453. Lodhia, S.K., Moran, C., Kunz, N.C. and Huisingh, D., 2013. The sustainability agenda of the minerals and energy supply and demand network: an integrative analysis of ecological, ethical, economic, and technological dimensions. Moran, C.J. and Kunz, N.C., 2014. Sustainability as it pertains to minerals and energy supply and demand: a new interpretative perspective for assessing progress.Journal of cleaner production,84, pp.16-26. Rader, T., 2014.Theory of microeconomics. Academic Press.