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The article in question dwells upon the demand and supply correlation in the commodity market in 2014. First, Sanderson and Hume (2014) note that demand for such resources as iron ore, oil, and others was quite significant in 2014.
Although there was a certain slow-down in the development of markets in Asia and Europe, the demand did not decrease dramatically during the year. However, the researchers also add another point. They state that the supply increased significantly, as companies were willing to make more profits and win larger markets.
Sanderson and Hume (2014) point out that the correlation between supply and demand was violated. Thus, the authors note that supply grew by 12% in 2014 while the demand only increased by 9%. This led to the market’s saturation and, as a result, to a decrease in prices. Finally, the authors conclude that demand is unlikely to return to the level of previous years due to the slow-down in the development of such markets as China.
This article can be seen as an example of the correlation between supply and demand. It has been acknowledged that supply and demand are very close, and they have a significant impact on each other (Causevic, 2014). Thus, when the supply for certain products is decreasing, the demand is likely to decrease. Clearly, the right correlation between the two concepts is important for products’ prices, and producers (and sometimes governments) have to undertake certain steps to affect prices.
It is possible to note that there are numerous ways to do that. Rahji and Adewumi (2008) state that the government should respond to the change in correlation when it comes to the grain market. Hence, the researchers note that the government should restrict the import of the product to increase the demand as well as prices (Rahji & Adewumi, 2008).
The article also shows that the commodity market is highly elastic. The elastic market is the one where the demand and supply correlation have a dramatic impact on prices (Mankiw, 2014). The elasticity is determined by the fact that the products are essential or not essential to consumers. Non-elastic markets are food or healthcare markets, as people will still buy these products irrespective of the price. Thus, if the prices go up, customers still buy the products.
When it comes to commodities, these cannot be seen as essential products to consumers as they are more important for producers. For instance, when the market is saturated with these kinds of products, prices go down, as producers of consumer products simply do not need so many resources. At the same time, when the demand is growing, the price is also growing since the companies need resources to produce their products.
In conclusion, it is necessary to note that the article in question unveils the essence of supply and demand correlation. The authors consider the commodity market and provide substantial explanations of the reasons for the price decline at the end of 2014. I agree with the authors that companies’ desire to produce more resources was one of the major reasons for the decrease in the process.
Clearly, decreasing demand also played a certain role in the process. Nonetheless, companies’ desire to sell more and enter new markets was crucial in the process. The article also helps understand one of the most important concepts of the market, which has to be taken into account.
Reference List
Causevic, F. (2014). The global crisis of 2008 and Keynes’s general theory. New York, NY: Springer.
Mankiw, N. (2014). Principles of economics. Stamford, CT: Cengage Learning.
Rahji, M. A. Y., & Adewumi, M. O. (2008). Market supply response and demand for local rice in Nigeria: Implications for self-efficiency policy. Journal of Central European Agriculture, 9(3), 567-574.
Sanderson, H., & Hume, N. (2014). Supply is key to commodities’ volatile year. Financial Times. Web.
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