| Abstract: | Previous studies have identified a single, stable and strong correlation between the price of metals and their consumption, such that low priced metals are always used in large amounts and visa versa. Some have interpreted this as evidence that metals share a common demand curve so that a single price elasticity of demand exists. This paper reviews and tests this hypothesis against a number of other possible explanations, including the idea that the relationship is an empirical curiosity. Modifications to the demand curve were tested by allowing metals to have different intercepts and price elasticities. The results from this analysis suggest that metals do not share a common demand curve and that the correlation identified between the price of metals and their level of consumption is an empirical curiosity. As such, the singular price elasticities published in past papers should not be used for assessing future rates of metals substitution. |
