Wednesday, February 5, 2014

Increased Innovation and Supply

The Wall Street Journal reports that Chinese steel producers have come up with an innovation to use cheaper "nickel pig iron" to produce nickel.  As a result the supply of nickel has dramatically increased and nickel prices have significantly dropped from over $50,000 a metric ton in 2007 to about $14,000 a metric ton, which is precisely what is predicted by the supply and demand model.  As the article explains, the decline in price is not only due to this innovation, but also due to a drop in demand - which also fits the supply and demand model.

No comments: