1. The table below shows the global market for the mineral sand, zircon. It shows the world price and the quantity of zircon bought for each year from 1992 to 1996. Because zircon is resistant to corrosion and heat, it is used in engines, electronics, spacecraft and the ceramics industry. Zircon products are also used in computer disc drives, for lightweight warmth and protection in clothing, and in many domestic products such as ballpoint pens. The market works by miners extracting Zircon and then selling it on the open market to producers who make various products out of it. The global zircon market is perfectly competitive.

	World Price ($ per ton)	Quantity Traded (thousand tons)
1992	17	1,000
1993	34	750
1994	35	770
1995	45	1,155
1996	47	1,156

You are managing a team trying to work out how responsive the demand for zircon was to price changes during this period. During your research you find out the following:

1. The US government tripled expenditure on military electronics components in the first quarter of 1995. Military applications of electronic systems require large amounts of zircon to make them robust to extreme conditions.

2. Indigenous Australians gained a form of legal title to huge areas of remote Australia in 1993, where over 50% of the world's mineral sands are mined. This form of legal title has allowed indigenous Australians to restrict mining activity in their traditional tribal areas.

Answer the following question, using a diagram if appropriate:

a. Account for the price and quantity movements from 1992 to 1994

Next 3 questions use the same data above.

2. Using the same information as in the previous question...

Answer the following question, using a diagram if appropriate:

b. Account for the price and quantity movements from 1994 to 1996

3. Using the same information as in the previous question...

A rival team at another firm computed the demand elasticity for zircon using data from 1994 and 1995 only.

c. Using the data in the table, derive what their estimated elasticity was. Does this number make sense? Why/Why not?

4. Using the same information as in the previous question...

Now do the following:

A rival team at another firm computed the demand elasticity for zircon using data from 1994 and 1995 only.

d. Using the data in the table, pick the price and quantity from two years and use them to compute an elasticity of demand. Explain why your estimate is better than the rival teams.

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