Calculate the monthly rate of inventory growth in global

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Reference no: EM13106904

Q. The world market for newly smelted primary aluminium (i.e., excluding scrap or recycled sources) recently experienced a period of rising inventories and falling prices. The Wall Street Journal reported that Russian smelter Rusal, the world’ s largest aluminium producer, expected primary aluminium ingot prices would need to fall even further before worldwide inventory accumulation could stabilize. Suppose the demand for primary aluminium can be represented by the equation

Qd = 124 – 0.025 P

Where Qd is the annual worldwide quantity demanded in millions of metric tons of new aluminium P is the dollar price of new aluminium per metric ton. Further, suppose the world supply of aluminium is Qs = -50 + 0.025P

Where Qs is the annual worldwide quantity supplied in million of metric tons.

At the time of Rusal’s concern, primary aluminium prices were relatively high at $3,600 per metric ton. At this price, calculate the monthly rate of inventory growth in the global aluminium market using the given demand and supply equations for the world aluminium market.

Reference no: EM13106904

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