Demand, Supply, Markets, Prices
Mineral Prices, and Demand-Supply-Price Interactions
MNTC 409 - Mineral Economics
Doug Macaulay
Learning Outcomes
This video will assist you in achieving the
following Learning Outcome(s) for this week:
• Recognize the impact of elasticity, and the
differences between movement along and
shifts in supply and demand curves [CLO 1]
• Explain characteristics of mineral prices,
and how demand, supply and price interact
[CLO 1]
This material is copyrighted and is for the sole use of students registered in MNTC 409. This material shall not be distributed or disseminated to anyone other than students registered in MNTC 409.
Failure to abide by these conditions is a breach of copyright, and may also constitute a breach of academic integrity under the Queen’s University Senate’s Academic Integrity Policy Statement.
Key topics
• Characteristics of mineral prices in
the short run and long run
• Interactions between demand,
supply and price
• Role of inventories, recycling,
investors and speculators
This material is copyrighted and is for the sole use of students registered in MNTC 409. This material shall not be distributed or disseminated to anyone other than students registered in MNTC 409.
Failure to abide by these conditions is a breach of copyright, and may also constitute a breach of academic integrity under the Queen’s University Senate’s Academic Integrity Policy Statement.
Key topics
• Characteristics of mineral prices in
the short run and long run Part 1
• Interactions between demand,
supply and price
• Role of inventories, recycling, Part 2
investors and speculators
This material is copyrighted and is for the sole use of students registered in MNTC 409. This material shall not be distributed or disseminated to anyone other than students registered in MNTC 409.
Failure to abide by these conditions is a breach of copyright, and may also constitute a breach of academic integrity under the Queen’s University Senate’s Academic Integrity Policy Statement.
Demand, Supply, Markets, Prices
Mineral Prices, and Demand-Supply-Price Interactions
Part 1 – Demand and Supply Drive Mineral Prices
Mineral prices
• Fluctuate over the short run
• Real prices follow secular
trends over the long run
Mineral prices
• Fluctuate over the short run
• Real prices follow secular
trends over the long run
Movement of a variable in a
relatively consistent direction
over a longer period
Mineral prices
• Fluctuate over the short run
• Real prices follow secular
trends over the long run
From: “Mineral Economics and Policy”, Third Edition, by John E. Tilton and Juan Ignacio Guzmán. RFF Press (2016), 96
Mineral prices
• Fluctuate over the short run
• Real prices follow secular
trends over the long run
• Downward trend 1970-
2003
From: “Mineral Economics and Policy”, Third Edition, by John E. Tilton and Juan Ignacio Guzmán. RFF Press (2016), 96
Mineral prices
• Fluctuate over the short run
• Real prices follow secular
trends over the long run
• Downward trend 1970-
2003
• Recent price rise –
fluctuation, or change in
trend?
From: “Mineral Economics and Policy”, Third Edition, by John E. Tilton and Juan Ignacio Guzmán. RFF Press (2016), 96
Interactions between demand, supply and price
• Price formation through interaction of demand and supply
• Short run vs long run
• Prices influence demand and supply
• Time lags and their implications
• Other factors and their implications
Price formation in the short run
Price S
($ per unit)
Quantity (tonnes per year)
Following: “A Guide to Primary Commodities in the World Economy” by Marian Radetzki. Basil Blackwell (1990)
and “Mineral Economics and Policy”, Third Edition, by John E. Tilton and Juan Ignacio Guzmán. RFF Press (2016)
Price formation in the short run
Price S
($ per unit)
Q
Quantity (tonnes per year)
Price formation in the short run
Price S
($ per unit)
Q
Quantity (tonnes per year)
Price formation in the short run
Price S
($ per unit)
Q
Quantity (tonnes per year)
Price formation in the short run
Price S
($ per unit)
Pmid
Drec Dmid Dboom
Qmid
Quantity (tonnes per year)
Price formation in the short run
Price S
($ per unit)
Pboom
Pmid
Prec
Drec Dmid Dboom
Qmid
Quantity (tonnes per year)
Price formation in the short run
Price S
($ per unit)
Pboom
Pmid
Prec
Drec Dmid Dboom
Qmid
Quantity (tonnes per year)
Price formation in the short run
Price Sdis S
($ per unit)
Pmid
Drec Dmid Dboom
Qdis Qmid
Quantity (tonnes per year)
Price formation in the short run
Price Sdis S
($ per unit)
Drec Dmid Dboom
Qdis
Quantity (tonnes per year)
Price formation in the short run
Price Sdis S
($ per unit)
Drec Dmid Dboom
Qdis Qmid
Quantity (tonnes per year)
Price formation in the short run
• Shifts in demand curve have greater impact on mineral prices
• Impact on prices is greater when utilization of capacity is high
• Output and prices move together
Price formation in the short run
• Shifts in demand curve have greater impact on mineral prices
• Impact on prices is greater when utilization of capacity is high
• Output and prices move together
• “When times are good for mineral producers they are very good,
and when they are bad they are very bad”
John E. Tilton and Juan Ignacio Guzmán (2016)
Price formation in the long run
From: “Mineral Economics and Policy”, Third Edition, by John E. Tilton and Juan Ignacio Guzmán. RFF Press (2016), 101
Price formation in the long run
From: “Mineral Economics and Policy”, Third Edition, by John E. Tilton and Juan Ignacio Guzmán. RFF Press (2016), 101
Price formation in the long run
From: “Mineral Economics and Policy”, Third Edition, by John E. Tilton and Juan Ignacio Guzmán. RFF Press (2016), 101
Price formation in the long run
• Shifts in supply curve have greater impact on price trends
• Long run prices are “equilibrium levels towards which prices
are moving over the long run at a given point in time”
John E. Tilton and Juan Ignacio Guzmán (2016)
• Actual prices 10 years from now will reflect short run
conditions at that time
Demand, Supply, Markets, Prices
Mineral Prices, and Demand-Supply-Price Interactions
End of Part 1
