Question

a) The article identifies a number of factors behind the recent increase in the price of

aluminium. Mention these factors and indicate whether they are demand-side or supplyside

factors.

b) With the aid of a well-labeled diagram, illustrate the effects of the factors identified

in part (a) above on the equilibrium price and quantity of aluminium. Pay attention to

the statement in the article that “Supply constraints, however, have been more

important” when drawing your diagram.

Answer 1

A)

• Price of other related products eg. Iron.
• Improvement in the mining technology.
• Improvement in the labour efficiency.

B)