Economics – The interaction of demand and supply | e-Consult

The derived demand for copper arises because copper is a crucial component in many industries. The factors determining this derived demand are:

• Electrical Industry: Copper's excellent electrical conductivity makes it essential for wiring, cables, and electrical components. This is a major driver of copper demand.
• Construction Industry: Copper is used in plumbing, heating, and electrical wiring in buildings. Construction activity directly impacts copper demand.
• Manufacturing Industry: Copper is used in machinery, motors, and other industrial equipment. Industrial production levels influence copper demand.
• Electronics Industry: Copper is used in printed circuit boards, semiconductors, and other electronic components. The growth of the electronics industry is a significant factor.
• Transportation Industry: Copper is used in electric vehicles, trains, and other transportation systems. The increasing adoption of electric vehicles is a growing driver of copper demand.

Diagrammatic Illustration:

The diagram should show a standard supply and demand curve for copper. A rightward shift in the demand curve (due to increased demand for electrical goods) will lead to a higher equilibrium price and quantity of copper. The curve should be labelled 'D' and the price axis should be labelled 'Price of Copper (P)'. The quantity axis should be labelled 'Quantity of Copper'. The diagram should clearly illustrate the impact of the shift in demand on the equilibrium price and quantity.

Explanation of the diagram: An increase in the demand for electrical goods (e.g., more appliances, increased construction activity requiring more wiring) shifts the demand curve for copper to the right. This results in a higher equilibrium price and a higher quantity of copper traded in the market. The increased price incentivizes copper producers to supply more copper, and consumers are willing to pay more for the copper-containing goods.