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With the aid of at least one diagram, explain three factors that may cause the demand for a commodity such as copper to increase.

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Introduction

´╗┐With the aid of at least one diagram, explain three factors that may cause the demand for a commodity such as copper to increase. (10 marks) A commodity a raw material or primary agricultural product that can be bought and sold, such as copper or coffee. A demand of a commodity indicates the various quantities of the commodity that consumers are willing and able to buy at different possible prices during a particular time period, ceteris paribus (all other things being equal). They are many factors which can affect the demand for a commodity. ...read more.

Middle

at every price level e.g. P1; a rightward shift of the demand curve of the commodity (D1 to D2). For example, copper consumption will grow drastically in China as a consequence of overall economic growth. One of the largest drivers of copper will be the growth of the Chinese consumer. The salaries, and so incomes, of the now one billion Chinese consumers? have increased, and so domestic consumption will continue growing (which in itself is projected to grow 500% by 2025). An increase in consumer income, means more demand for cars, appliances, garments, electronics etc at every price level e.g. ...read more.

Conclusion

If products are substitutes for each other, then a change in the price of one of the products will lead to a change in demand for the other product. Tea and coffee are good substitutes. A rise in the price of one (say, coffee) results in a fall in the demand for the other (tea) (and vice versa). The reason is that as the price of coffee rises, some consumers switch from coffee to tea, and the demand for tea rises (Q1 to Q3) at every price level e.g. P1, causing a rightward shift of the demand curve of tea (D1 to D2). Moreover, demand also depends on people?s tastes, preferences, habits and social customs. A change in any of these must bring about a change in demand. ...read more.

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