ABSTRACT
An industry is subdivided into a primary sector and a secondary sector. To make quantitative estimates of metal usage, substitution, and market shares as cost factors vary, two econometric models were constructed and estimated, one of the domestic copper industry and one of the domestic aluminum industry. The models are linked by copper and aluminum prices, derived demand from the copper- and aluminum-using sectors of the economy, and the copper-aluminum elasticities of substitution in each sector. Copper-and aluminum-industry problems should be representative of those faced by the mineral processing sector as a whole, and, because the two industries are unequally affected by higher energy prices and falling ore quality, they should exhibit diverse responses to the changed situation. The demand equations are neoclassical marginal productivity equations, and sector demand depends on copper and aluminum prices, aggregate economic activity, and the price of the sector's output. The chapter also presents an overview of the key concepts discussed in this book.
