The U'S' Steel Industry

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The U.S. Steel Industry
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Table of Contents

• Stephen
• 1. Economics
• 2. Opportunity Cost
• 3. Substitution Effect
• Will
• 1. Price Ceilings
• 2. Change in Demand
• 3. Inputs

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What Is Economics?

• Economics is the study of choice under conditions
  of scarcity.
• Economics can be divided into two large parts,
  Macroeconomics and Microeconomics.

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Macroeconomics

• Macroeconomics is the study of the economy as a
  whole.
• A macroeconomic principle would be to look at the
  nations unemployment rate, rather than just the
  number of people who have been laid off in the
  United States steel industry.

5
Microeconomics

• Microeconomics is the study of the behavior of
  individual households, firms, and governments
  the choices they make, and their interaction in
  specific markets.
• Someone studying microeconomics may examine
  Wheeling-Pittsburgh Steel Corporations exit from
  bankruptcy.

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Opportunity Costs

• Opportunity cost is defined as what is given up
  when taking an action or making a choice.
• Weirton Steel Corporation produces tin plated
  steel and galvanized steel as two finished
  products among other things.

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Opportunity Costs Cont.

• Cold rolled steel is an input in making both tin
  plated steel and galvanized steel. When a slab
  of cold rolled steel comes off the line, the
  corporation must choose whether to use it in
  making tin plated steel or galvanized steel.

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Opportunity Cost Cont.

• If they choose to use it to produce tin plated
  steel, then their opportunity cost is giving up
  an additional unit of galvanized steel.

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Substitution Effect applied to the American Steel
Industry
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The Substitution Effect

• Def As the price of a good falls, the consumer
  substitutes that good in place of other goods
  whose prices have not changed.

(Hall, Robert E. Economics Principles and
Applications Chapter 5, pg. 136
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The Substitution Effect

• An Example
• Anheuser Busch company will buy more tin to make
  cans for their product when the price of aluminum
  goes up.

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Price Ceilings Applied to the steel industry
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Price Ceilings

• Price Ceilings
• The textbook says a price ceiling creates a
  shortage and increases the time and trouble to
  buy the good. (While the price may drop the
  opportunity cost may rise.)
• Most price ceilings are put into place by the
  government

(Hall, Robert
E. Economics Principles and Applications
Chapter 3 pg. 83)
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Price Ceilings

• In the last several months the U.S. has imposed
  the 201 tariff. This tariff has limited the
  amount of foreign steel that can come into the
  U.S..

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Flat-Roll Prices Before, After
Section 201
Before
After
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Changes in Demand applied to the American Steel
Industry
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Change in Demand

• Changes in Demand can be caused by any one of the
  five INEPT factors of Demand. The main INEPT
  factor that we are going to look at is The
  prices of related goods.
• Section 201 tariffs raised the price of imported
  steel.

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Change in Demand

• This increase in the price of imported steel
  causes steel consuming companies to have a higher
  demand for domestic steel.

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Fixed Input

• An input whose quantity must remain constant
  regardless of how much output is produced.
• A fixed input for a steel company is construction
  of a mill.
• It takes three to five years to construct a mill.
  Therefore, in the short run the current mill is
  a fixed input.

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Variable Input

• An input whose usage can change as the level of
  output changes.
• One possible variable input is labor.
• In July of 2003 Weirton Steel Corporation laid
  off 41 workers.

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Conclusion

• The U.S. Steel Industry exhibits many economic
  models that the textbook discusses. We view
  these models as it interacts in the global
  marketplace. Producing roughly 100 million tons
  of steel annually, the U.S. is a major player in
  the global steel industry.