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

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. P1. An increase in demand for buildings and technologies results in an increase in the quantity demanded for commodity of copper to produce them (Q1 to Q3) at every price level e.g. P1; a rightward shift of the demand curve of copper in China (D1 to D2).

Sometimes, the demand for a commodity might be influenced by prices changes of other commodities. There are two types of related goods. These are substitutes and complements. Two commodities are substitutes if they satisfy a similar need. 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. If preferences and tastes change in favour of a commodity (the commodity becomes more popular), demand increases at every price and the demand curve shifts to the right. For example, if people develop a taste for tea in place of coffee, the quantity demanded for tea will increase (Q1 to Q3) at every price level e.g. P1, causing a rightward shift of the demand curve of tea (D1 to D2); and that for coffee will decrease (Q1 to Q3) at every price level e.g. P1, causing a leftward shift of the demand curve of coffee (D1 to D3).