Economic Essay Example | Topics and Well Written Essays - 1500 words - 3

Economic - Essay Example The solid boost in quantities sold jointly with an upsurge in iron ore prices forced sales values to a new record of $11.3 billion which is up by 83% as against the past year’s level. Pricing in the Iron ore market For the past 40 years, the prices of iron ore have been determined in private discussions among the small fistful of mineworkers and steelworkers which reign both spot and contract markets. By tradition, the first contract attained amongst these two groups places a yardstick to be adopted by the remainder of the industry.2 This yardstick scheme of pricing iron ore has on the other hand in current years started to collapse, with contributors along both demand and supply chains bidding for a change to short time pricing. Since most of the other commodities were already following a matured market based pricing system, it is likely for iron ore to go behind. Even though exchange-authorized iron ore exchange contracts have grew during the past few years, so far no switch over has instituted a good futures market for the mostly seaborne $88 billion a year iron ore trade (Financial Times, 2009). The need for change in the country The need for change in the country will be due to the following factors: i Economic growth in the long-run for Western Australia’s economic growth will carry on to be well-built for the next 20-30 years. ii The demand for labour under such circumstances will persist to develop more quickly than the ability of the state to supply. This demand will have to be met by the government from the states’ natural population or from the present migration plans. iii It is estimated that a whopping additional 224,000 workers will be needed by 2016 in Western Australia. iv This will result in demand for training people, housing requirements will be more, and there will be the need for drastic growth in infrastructure as well. The demand for production with reference to Isoquant and Isocosts curve theory The principle of subs titution discloses a basic theory of neoclassical location theory. Without a doubt, it may be debated that in a neoclassic site, the position of factories is a practice in changeover as 'trade-offs' are made amongst the different location elements. Thus procurement and allocation costs are interchanged for one another; for instance if a site is near the market then its procurement costs substitute for distribution costs. At the same time if a factory is situated near the sources of raw material substitutes, distribution costs for procurement costs. If a cheap labour location has to be considered then the factory needs to compare the impact of lesser labour costs for high transportation costs or vice versa that is lower transportation costs for higher labour costs. The theory is that in reality firms are boosted to scatter production to low wage areas to make precisely this form of permutation as productions grow. As the production matures, neither the low wage region or the 'least t ransport cost will provide a solution (Hayter, 2004). Figure showing all possible combinations of optimal input for a given output Source: Hayter, 2004 The above graph illustrates the production theory. In this specific theoretical position, an isoquant