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Explanation of resources boom (1 Viewer)
- Thread starter Sytri
- Start date
Hi there,
A resource boom is usually characterised by extremely high demand for a nation's commodities e.g. iron ore. Australia went through a boom (probably still is going but running slower than before) which was caused by China and India's peak demand for our non-renewable resources. They were primarily using it for steel production to be used in infrastructure such as schools, hospitals and energy plants as well as energy production methods. As you know from your equilibrium graph, when demand increases so does the equilibrium price for commodities (answering your second question).
The overall impact is accelerated economic growth through growth in Australia's trade accounts. However, this is counteracted by an appreciation in the Australian dollar which will lead to decreased international competitiveness. In the grand scheme of things, this may mean that the proportion of commodity exports for other nations besides Australia may be lower (seeing as two of the biggest nations are opting for Australia's resources) and also, maybe their trade agreements.
Hope this helped
A resource boom is usually characterised by extremely high demand for a nation's commodities e.g. iron ore. Australia went through a boom (probably still is going but running slower than before) which was caused by China and India's peak demand for our non-renewable resources. They were primarily using it for steel production to be used in infrastructure such as schools, hospitals and energy plants as well as energy production methods. As you know from your equilibrium graph, when demand increases so does the equilibrium price for commodities (answering your second question).
The overall impact is accelerated economic growth through growth in Australia's trade accounts. However, this is counteracted by an appreciation in the Australian dollar which will lead to decreased international competitiveness. In the grand scheme of things, this may mean that the proportion of commodity exports for other nations besides Australia may be lower (seeing as two of the biggest nations are opting for Australia's resources) and also, maybe their trade agreements.
Hope this helped