Introduction
Labor Government in Australia had in the recent past imposed a legal ban on Uranium mining and production in Western Australia. The move by the Government to lift the ban has paved way for the potential exploitation of large tons of uranium throughout the nation’s uranium-rich areas. This move is seen by many people and economists as a positive indication of developing the uranium industry which had stalled and dragged behind since the ban started. Australia has the largest uranium reserve in the country and in the whole world hence coal mining has a direct effect on the nation’s economic growth.
This paper seeks to analyze the move by the government to lift the administrative caveat on the let out which would not require legislation by the government. This paper seeks to analyze the economic implications of the move by critically looking at the economic models such as the demand and supply of uranium before and after the ban. Concepts such as opportunity cost, elasticity, and consumer and producer surplus are studied concerning the Labor government’s move to lift the ban on uranium mining. The ban has an implication on the cost of uranium hence the demand and supply (Vienneau, 24).
Supply and Demand
In economics, the price of a particular product is determined by the supply and demand of the product. Such a concept is fundamental in finding out the expected changes in the lift of the ban on uranium. When the demand for a product is in equilibrium with the supply for the product, the price of the product is reached (Humphrey, 5). The ban on uranium was aimed at ensuring that the recent stock of uranium is consumed first and the environmental problem caused by uranium mining is reduced. The depleted uranium already mined which was lying idle and waiting to be used no longer exists. The demand has risen not only in Australia but also worldwide. The shortage in the market has grown immensely such that the lift on the ban will increase the demand and supply.
As shown in the expected price and quantity graph, there is only one level at which the demand for uranium should equal the quantity supplied. When there is a high price especially when the uranium was banned, the quantity of uranium demanded will increase hence no surplus production is realized. This has a direct implication on the cost of the products and hence the country seeks to look for other means of energy that would substitute the normal uranium (Robert, 216). The sellers who get their tons of uranium from other places end up selling their uranium at a very high price since they incur a lot of charges in acquiring the products.
During this time, there was a positive shift in supply and demand. The graph changes to a new demand and supply equilibrium. For example, a nuclear reactor engine that consumes uranium-238 and runs an effective and efficient engine needs one ton of uranium for energy output resulting in one gigawatt per year. This means that the cost of production of the same amount of uranium changes with the lift on the ban (Vienneau, 34).
Statistics relate to over one thousand tons of uranium lying idle meaning that before the ban, the price is lower and the demand is reduced. This is the opposite during the ban. When the ban is lifted, the production will tremendously go up since the government has lifted their legislation on the production. The consumption will increase and the supply also increases. According to Premier Colin Barnet, Australia exported almost 20 percentages of the world market and with the lift on the ban, this production will increase.
Opportunity Cost
Opportunity cost refers to the best alternative that must be forgone to pursue another action that may be of importance during that time. The labor government had the ban with clear cited reasons of environmental implications which may be forgone with the current economic importance of the uranium mines. This option has better benefits attached to it than the options that lead to the ban. Though all the options seem to be viable and workable, the government had to make the best choice since its estimated outcomes would restore the stalled unemployment, economic returns, etc. The risk of forgoing environmental hazards can be forgone so that better achievements of monetary benefits can be realized (Humphrey, 1 4).
Elasticity
This can be related to the expected rise in the cost since the power generated from nuclear is a low content of carbon energy source. This is meant to replace fossil energy which has been a major challenge on the industries producing energy within Australia and throughout the world. The emission from greenhouse plants where uranium is mined relies fully on the risen power. Since this, the lift on the ban is not expected to change drastically but will take place until the equilibrium where the demand and supply are at equilibrium. The decline in the best grades of uranium will also be expected since this kind of fuel is less environmentally friendly and more expensive to extract and mine. All this depends on the fuel supply which depends on uranium mining, the milling process, and the enrichment of fuel during manufacturing (White, 13).
Consumer and Producer Surplus
This concept is used to create welfare judgments about how a product can be produced and distributed to the market. This helps to know the best products in the market and their level of production and distribution. The proper analysis of the consumer-producer allows us to judge whether the product’s production is at the best or optimal or not. This change is expected since the production rate will be freed from the government’s interference and legislation. The freed market is a better opportunity to exploit the market fully (Humphrey, 4).
Consumer surplus refers to the differences between the amounts of money the buyers must pay to buy the product and the value of the buyers from a level of consumption of the goods (Bruce, 31). This is the welfare entitled to buyers from the good. The rate of uranium production is expected to lead to consumer surplus with time since the production and distribution will not be one hundred percentages from the start of the lift of the ban.
On the other hand, producer surplus is the difference between the revenue sellers portion from the sale of a product and the least amount of money they would accept to produce the product. This is the benefit that the sellers get from selling a product. It is also evident that the energy products competition is still high even when uranium was banned in Australia. The market and producer surplus can be evaluated from the goods and services supply curve. Under most conditions, the surplus can be maximized if there is a free market prevailing in the equilibrium.
It is very easy for the manufacturers of uranium to impose restrictions on the uranium productions and the general output after the lift of the ban and raise the prices so that they can match the losses cost when the ban was imposed. Though this is usually done when the buyers are many and the sellers are few. When a single seller can sell to a single buyer, then this state can exist. This was common during the ban. With many sellers selling to few customers, the decisions become hard to control since each seller will be desperate to have their products sold (Kirchhoff, 3).
Conclusion
Uranium ban in Western Australia had very severe implications on the demand and supply of uranium products in the country. Since Australia is one of the largest producers of Uranium, it becomes evident that during the ban, the demand rose and supply was reduced. All these moves by the government posted mixed reactions on the public as well as changed the economic production of the country since uranium energy is relied upon by the country and the whole world. The change in the market structure is a concern to the producers and the general users. Since competition still exists even with other energy producers, it becomes clear that the prices of the products will have to be dictated by the amount of uranium produced and the willingness of the buyers to buy the energy from uranium at the expense of other energy products (White, 13).
Works Cited
Humphrey, Thomas. Marshallian Cross Diagrams and Their Uses before Alfred Marshall. Economic Review, 3.2 (1992): 14-15.
Kirchhoff, Bruce. Entrepreneurship and Dynamic Capitalism: The Economics of Business Firm Formation and Growth. Westport, CT: Praeger Publishers, 1994.
Vienneau, Robert. On Labor Demand and Equilibrium of the Firm. Manchester: Manchester School, 2005.
White, Graham. The Poverty of Conventional Economic Wisdom and the Search for Alternative Economic and Social Policies. The Drawing Board: An Australian Review of Public Affairs, 4.1 (2001): 2-3.