The quantity demanded of a good or service is the amount that consumer plan to buy in a specific period of time at a particular price. The quantity supplied of a good is the amount that producers plan to sell in a given period of time at a particular time. Over supply is when a good is supplied more then the quantity demanded. Unemployment is there are workers who are able and willing to work but do not have jobs.
All the above problems are because some of the illegal duplication of the steel works. It is said in the article, “During the first six months of the year production in iron sector grew by twenty one percent.” This is also because some of the firms that were shut down by the government are still working and producing steel. The problem here is that the duplicate steel is cheap so there is more demand for that while to good quality or the original steel produced by the government has less demand and there is more supply of that compared to the demand. This is thus creating a surplus amount of steel. The line “ the supply of electrolyte aluminum exceeded in china” shows us that. If this is not controlled it would lead to unemployment, pollution and bad loans for the China and some measure must be taken to solve these problems.
P
S
P
D
D1
Qd Qs Q
The graph above shows that due to the over supply of the steel there is surplus amount of steel in the market that is not demanded. It shows us the market in which the original steel is produced. D is the original demand curve but as the steel is cheap in the duplicate industry the demand decreases to D1. The price is fixed due to the cost of production. The supply remains the same because the government is assuming that the duplicate market has been stopped from producing. The over supply and the continued production of duplicate goods is going to construct major problems like unemployment, pollution and bad loans. It will also be a waste of resources
The government is producing but it is not being sold as the duplicate goods are cheaper. There will be less demand for the original steel produced by the government. The resources are not being properly utilized. The industry is producing at X that shows the inefficiency due to the excessive investment in the industry.
Q
As shown in the diagram below that the surplus would also lead to unemployment. If the demand decreases and if the demand decreases, the labor demand LD will come down to LD1. The quantity of labor is fixed. After the drop from the LD to LD1 we will see that there will be over supply of the labor. It will eventually lead to unemployment.
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LS
LD
LD1
QL
If the duplicate producers continue to produce, they will increase pollution as there methods of production are not very environmental friendly. There aim is to earn dirty money irrespective of the price the environment has to pay for it. It will also cause bad loans in the banking sector. The companies that would have taken loans will not be able to pay the loan back as there would be not enough sales.
There could be a number of things the government can do to solve the problem. The first and foremost thing the government should make necessary laws to stop the productions of these of these duplicate steel-manufacturing companies. They should definitely make them stop. The good quality steel could be exported to other countries which will reduce the over supply of the goods. The public should be informed about the real product and the harms that are being caused by the duplicate products to the economy and the environment. This will increase the demand of the original steel and price equilibrium will be achieved.
