Western Australia economy Essay Example | Topics and Well Written Essays - 2000 words

Western Australia economy - Essay Example The economy of Western Australia is rich in resources.The development of economy of this State has been highly influenced by resources boom since 1890s.During the past few years,the industry of Western Australia’s resources had enjoyed excellent conditions instigated by its prevailing commodities’ demand in the international market The objective of this paper is to evaluate the probable effect of the commodity market boom in the Western Australian economy’s sector of the iron ore. The iron ore production in the Western Australian economy explicates 97% of total production in Australia. Most of the iron ore produced in Australia is predominantly exported to Asian market. Following the speedy growth during the last ten years in mainland China, Australian iron ore’s export market has significantly developed in China. This information is evident from the export amount in the year 2010 that amounted to 70 percent of the total iron ore in Australia. The followin g diagram represents the export figures of iron ore from Australia to the Asian market as compared to the rest of the world2. Source: 2. Effect of Increase in Demand for Iron-Ore in Western Australian Economy The production factor of iron ore in the Western Australian economy is primarily dependent on the demand prevailing in the Chinese market for iron ore. Development in the Chinese construction and industry sector is the major cause of increased demand of iron ore in China. As a result of the demand prevailing in China for iron ore with the expectations of even higher demand in the near future, the prices in the Australian iron ore will attain all time high this year, i.e., in 2011. According to the market expectations in Australia, the spot market price on an average for iron ore in the year 2011 would increase to US$153-US$154 from US$146 in the year 2010. The expected price increase for iron ore is generated by the steel output in higher amount due to increasing demand in the growing economy of China3. Source:4 The above figure illustrates the production of crude steel on a monthly basis in different countries. The illustration reveals that the steel production in China has been the highest compared to other countries of the world. From meeting up the demand for iron ore from the Asian market, especially China, Australian manufacturers are producing iron ore by utilizing their maximum capacity for exports. In this scenario, production of the optimum level of output for satisfying the international market’s demand is a matter of concern for the Australian manufacturers of iron ore. As the demand at present in the Asian market is expected to remain constant or even increase in the coming 15 years, the only concern for Australian market is to bank upon the amount of production5. The theory of isoquants and isocosts is applicable for this Australian scenario regarding the production of the optimum quality pertaining to the prevailing demand in the Asi an market. A clearer prospect of the theories can be evolved after explanation of the input requirements in the commodity production with reference to the input demand and prices. The most important inputs for production of iron-ore in Australia are capital and labor. As the concern for the Australian market is to produce maximum amount of iron ore through finding the optimum combination of the inputs required for production, implementation of the concept of isoquants would be most helpful for the economy. An isoquant is that curve which depicts all efficient combination of inputs such as capital and labor by considering their technological efficiency. The quantity to be produced remains constant, but the combinations of