A rare and scarce earth metal known as Neodymium is used in many consumer and military products including smart-phones, smart-bombs, laptop computer monitors, and electric/hybrid cars. In one year's time, the price of Neodymium has gone from $19/lb. to $129/lb. Under these circumstances and the fact that at least 1 kilogram is used in each electric car that is assembled, a graph of the supply and demand for this product would show:

Question

Quizplus · Accepted Answer

The significant increase in the price of Neodymium indicates that the current market price is above the equilibrium price, reflecting a shortage of supply compared to the demand. This implies that buyers are willing to pay a higher price to obtain the rare earth metal due to its usefulness in various products, including electric cars. The increase in the price of Neodymium could also lead to a decrease in the demand for electric cars or an increase in the price of the final product, as manufacturers may need to pass on this cost to consumers.

A Rare and Scarce Earth Metal Known as Neodymium Is