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  • Subject Code : HI5003
  • Subject Name : Economics

Elasticity impact on events 

The degree of responsiveness which measures the percentage change in the quantity demanded or supplied due to percentage change in the price of that commodity is known as elasticity. South32 is a metals and mining company which produces several metals such as alumina, energy, manganese, zinc, metallurgical coal, silver, bauxite and nickel in Australia. Since the products are diversified and there are few markets in the industry, the company is operating under oligopoly market structure (South 32 2019). 

The elasticity of demand for the minerals and metals is inelastic because they are available in less quantity in Australia. The demand curve for the products of South 32 is steeper. The supply of the metals is also lower and makes it inelastic. The main reason is that the supply of metals and minerals in Australia is predetermined and therefore any percentage change in the price has little effect on the supply for metals (Nguyen 2016). The demand curve along with the supply curve for the products of South 32 is represented in figure 1 by D and S respectively. The equilibrium is attained at quantity Q and price P, where both the curve intersects (Lumen n.d.). 

Moreover, the elasticity impact on the event which is the sales of metals and minerals produced by South 32 can be shown through the changes in the equilibrium quantity and price in figure 2. Suppose the price rises for South 32 products from P to P1. The effect on the quantity supplied is rise in the supply from Q to QS. The impact on the demand is the fall from Q to QD. The change in the quantity supplied is more than the change in the price of the metals and minerals of the company. Even the change in quantity demanded is less the price change. The reason is inelasticity of demand and supply (Lawrence and Nehring 2015). 

If the price of the minerals and metals supplied by the company changes, there will be little impact on the supply and demand for the commodities. According to Reserve Bank of Australia (2019), there has been increase in the price of iron ore in Australian economy. The impact of the rise is only fewer shifts in the supply of iron ore which also complies with the inelastic supply. The further impact was lower increase in the exports of iron ore from Australia.

image showing the Demand and supply curve for products of South 32

image showing the Demand and supply curve for products of South 32

Elasticity in an organisation defines the competitive position in the Australian market. The producers in Australia stresses on the geographical trade and price elasticity to influence the customers and measure the needs of high quality products in the market. South 32 is a leader in iron ore and follows the oligopolistic market (South 32 2018). The cost of production affects the elasticity of supply which reflects the change in quantity with a change in price. Inelastic nature of minerals resulted due to less quantity and high prices. The impact on events can be seen with the change in production costs that influences the cost operating system of the producers in Australia. The cost of production of metallurgical ores are inferior in Australia to work in cost operations however, the Australian producers follow the oligopolistic company that dominates “higher end spectrum”. 

Australia is a top supplier in the metallurgical coal trade because of its oligopolistic companies. The countries likes Russia and United States indulge in high value for exports that increases the level of production by lowering the costs. The events appeared in South 32 reflects a measurable importance as thefts which is increased with the dissemination of duties (South 32 2018). Security is a major concern for the human resources that affects trained teams to work with the machines and equipment. By providing security to through various equipment and machines, human risk can be identified as lower. It will result in proper operations to implement the management plan and control by measuring the identified risks. 


It can be concluded that South 32 requires review and assessment of the production cost to measure the fluctuations in the market over the external and internal factors. These factors affect the workings of the company by lowering the production quantity. The operations of the company mainly focus on the production costs which influence the elasticity of supply. It can occur in the long run which needs to be reduced by the company by maintaining certain strategies. In the oligopolistic market it is necessary to maintain the supply and demand factors that affect the elasticity of the company. 


South 32. (2019). Our business. [Online]. Available at https://www.south32.net/our-business [Accessed on: 16 December, 2019].

Nguyen, B. A. 2016.  Economics of base metals. (A Thesis Submitted to the Faculty of Graduate and Postdoctoral Studies in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy in Economics). University of Ottawa, Canada. 

Lumen. N.d. Equilibrium, price, and quantity. [Online]. Available at https://courses.lumenlearning.com/wm-introductiontobusiness/chapter/equilibrium-price-and-quantity/ [Accessed on: 16 December 2019]

Reserve Bank of Australia. 2019. The recent increase in iron ore prices and implications for the Australian economy. [Online]. Available at https://www.rba.gov.au/publications/smp/2019/aug/pdf/box-b-the-recent-increase-in-iron-ore-prices-and-implications-for-the-australian-economy.pdf [Accessed on: 16 December 2019]

Lawrence, K. and M. Nehring. 2015. Market structure differences impacting Australian iron ore and metallurgical coal industries. Minerals, 5, 473-487. 

South 32. (2018). Annual Report  2018. [Online]. Available at: https://www.south32.net/docs/default-source/exchange-releases/annual-report-2018.pdf?sfvrsn=624522bf_6 [Accessed on: 15 December 2019].


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