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 ECONOMICS FOR BUSINESS FOR KIDMAN RESOURCES 

1. Introduction 

The report will deal with the mining industry and Kidman Resources is considered here for the analysis. This report will give a brief about the market structure of the industry and will determine the demand and supply of the company. This report will also analyze the impact of a recent event on the industry.

1.1 Introduction to the company 

Kidman Resources is a mining industry, which produces Lithium Ion batteries. According to the annual report, their current project will last about 47 years. The revenue they will earn for this project is expected about 33.5 billion USD. The EBITDA of this project is expected to be about 21.2 billion USD (Kidmanresources.com.au, 2019). Kidman Resources will integrate capital about 755 million USD which also includes the contingency. According to the annual report the internal rate of return will be 26.6%. They expect a payback from the project is near about 3 years. The expected price of LIOH for the first five year is 14.074 USD per ton. The expected average price of the LIOH over the lifetime of the project is 15.115 USD (Kidmanresources.com.au, 2019).

1.2 Background of the industry 

Mining industry contributes about 8% to the total GDP of Australia and contributes about 60% of export of Australia. Australia earned about $174 billion from the export of energy resources commodity. Australia ranked top in the Export of energy resources commodities in the world. About 200,000 people are directly employed in the mining industry and many individual are getting benefits indirectly from the mining industry. Australian government earned about $25 billion taxes and royalties from the mining industry. 30% of the exports are only the energy resources commodity. The value of this export is about $47billion. Australia also agreed free trade recently for the resource sector (Salam, 2017). 

2. Market for the good 

2.1 Factors influence the market demand 

Demand of any commodity is mainly the quantity that an individual is willing to buy. There are different factors that are influencing the demand for the commodity. The demand for the commodity depends on the various factors. Price of the commodity is a main factor of demand. If the price of the commodity is more, then, the quantity demanded for the commodity will be lower. If the price the commodity is lesser, then, the quantity demanded for the commodity will be more. In this context if the price of the lithium is higher, then the demand for the lithium will be lower. Similarly, if the price of the lithium is lower, then the demand for the lithium will be higher. The demand for a commodity also depends on the price of the close substitutes if the price of the close substitutes is lower and the price of the lithium is higher than the demand for the lithium will be lower. Similarly, if the price of the close products that can be a substitute is higher than the price of lithium then the demand for the lithium will be higher. The quantity demand for a commodity also depends on the availability of the product in the country if the availability of the commodity is more, then the demand of that commodity will be higher (Salam, 2017). The availability of lithium is higher in Australia hence, the demand for the lithium is higher in Australia. Australia also exports lithium outside of the country. If the availability of Lithium was lower in the country, then the demand will be slightly lower. Therefore these are the factors that determines the demand of the lithium in the country (Salam, 2017). 

2.2 Factors that determines the supply of the product 

Supply of a thing is determined by the willingness of the producer to produce at a given price. Many factors give an influence in the supply of a product. The main factor that determines the supply of a product is the commodity price. If commodity price is more, then the supply of the product will be higher. And if the commodity price is lower, then the supply of the commodity will be lower. That is commodity price and the supply is directly proportional to each other. In this context if the price of the lithium is higher, then the supply of the lithium will be higher and if the price of the lithium is lower, then the supply of the lithium will be lower. The factors that influence the supply is expected price (Sarkar, Sarkar and Bharadwaj, 2018). If the expectation of the producer is that if the future price of lithium will rise, then the producer will uplift its production. If the expectation of the producer is that if the future price of the lithium price will decrease then the producer will decrease its rate of production. Supply of a product is also influenced by the availability of the product if the availability of the product is higher, then the supply of the product will also be higher. If the availability of the product is lesser in the country, then the supply of the commodity will also be lesser. In this country, the availability of lithium is higher; therefore, the supply of lithium is higher for this country.

The factor that also determines the supply of the lithium is input cost. If the input cost that is if the labor cost or other technological cost rises for the industry, then the supply of the commodity also decreases. If the cost of production of the commodity decreases, then the supply of the commodity increases. Therefore, production cost and the supply of the commodity is inversely proportional to each other (Tai et al 2017). These factors determine the supply of the commodity. 

2.3 Elasticity 

Elasticity is the responsiveness of an individual due to a change in the factors that are responsible for the production of a commodity. Elasticity of a product can be of two types one is demand side elasticity and another is supply side elasticity. Demand side elasticity is the responsiveness of a consumer due to a price change of the commodity. Supply side elasticity is the responsiveness of the producer due to a change in the factors of production of the commodity. Here in this context the demand elasticity for the lithium is inelastic because with the change in the price of the commodity the consumers are less responsiveness. That is why the demand elasticity is inelastic. The supply side elasticity is also inelastic because the producers are also less responsiveness with the change in the cost of production because the demand for the product is higher therefore the producer will get the price if they raise the price of their product (Mining-technology.com, 2019). Therefore, the elasticity of supply is inelastic for the lithium industry.  

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