The authors explain that the international copper cartel (CIPEC) has been largely ineffective in raising the price of copper in world markets, and the reason is mainly due to the relatively elastic demand for copper. Suppose the cartel recognized that there are multiple uses for copper, and some of the uses have few substitute products (e.g., copper electrical wire) while others have several close substitutes (e.g., copper water pipes). If cartel attempted to raise the price of copper in one of these sub-markets, which market should the cartel choose?

Question

Quizplus · Accepted Answer

The cartel should choose the market with few close substitutes because demand is more inelastic in this market. Inelastic demand means that consumers are less sensitive to price changes, so a price increase would not significantly reduce the quantity demanded, potentially allowing the cartel to raise prices without losing much in terms of sales volume.

The Authors Explain That the International Copper Cartel (CIPEC) Has