Theory of Mineral Demand

Campbell, Gary A. ; Vogely, William A.
Organization: Society for Mining, Metallurgy & Exploration
Pages: 19
Publication Date: Jan 1, 1985
INTRODUCTION The theory of mineral demand often is slighted in the study of mineral economics. The supply side of the mineral industries usually commands a great deal more attention and effort by mineral economists than the demand side does because the study of mineral supply includes topics such as exploration, resource availability, and exhaustion theory that are generally considered unique to the mineral industries. Mineral demand, on the other hand, is thought of as being more general in nature and therefore of less concern to mineral industries specialists since it is similar to the demand for other inputs of production. This similarity with other inputs of production, however, does not negate the importance of a thorough understanding of mineral demand. It is the interaction of supply and demand that determines market behavior and not supply alone. Mineral demand is a key component among the factors that influence mineral production; there- fore, a good understanding of mineral demand can give one better insights into the industry behavior and trends than one would otherwise have. A strong working knowledge of the demand side of the mineral industries is a powerful tool for analyzing and predicting mineral market behavior. The material presented in this chapter does not depend on any special background in economics and should be accessible to all interested readers. The chapter is organized so as to permit an orderly progression of the basic topics of the theory of mineral demand while allowing digressions on related issues of special interest. The first section of the chapter is on the determinates of mineral demand. The discussion be- gins with the introduction of consumer demand and some of the necessary terminology of economics and proceeds to the particular case of the derived demand for an input of production such as minerals and the characteristics of such demand. The second section of the chapter is on the response of mineral demand to changes in economic variables like price and aggregate income. This second section of the chapter be- gins with a general presentation of elasticity of demand and continues with the particular case of the price responsiveness of mineral demand and its nature in the short and long-runs. A brief look at the response of mineral demand to price changes for other products is also included. The chapter concludes with a discussion on the effect of aggregate income changes on mineral demand and its nature in the short and long-runs.
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