With the help of an appropriate diagram and the information in Extract B, explain how the global transition to electric vehicles has affected the price of battery-grade lithium.
Global automotive markets and mineral extraction sectors have become highly interdependent in recent years. Rapid expansion in the electric vehicle (EV) market directly impacts raw material mining sectors, illustrating vital economic concepts such as derived demand and composite demand.
EV manufacturing relies heavily on high-energy-density rechargeable batteries, which require critical minerals like lithium, cobalt, and nickel. Lithium, once primarily demanded for smaller consumer electronics and ceramics, is now overwhelmingly sought after for automotive battery packs.
As global EV production scales up rapidly to meet climate targets, the demand for battery-grade lithium has intensified dramatically. Because of the technical requirements of automotive batteries, lithium cannot be easily substituted. This surge in automotive demand has diverted lithium away from traditional manufacturing sectors and caused a substantial rise in its global market price.
256 exam-style questions on AQA A Level Economics 1.3 Price determination in a competitive market, covering 1.3.1 The determinants of the demand for goods and services, 1.3.2 Price, income and cross elasticities of demand, 1.3.3 The determinants of the supply of goods and services, 1.3.4 Price elasticity of supply, 1.3.5 The determination of equilibrium market prices, and 1.3.6 The interrelationship between markets. Each one has a worked solution and a mark scheme showing where the marks go.