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The theoretical situation is this. What if a record breaking amount of platinum were discovered. What would happen to the economies that use, store, and/or produce platinum?

I would like to apply this theory to any kind of precious material or element. Other examples would be gold, uranium, or oil.

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  • $\begingroup$ The price of the resource falls and there is some disruption in the sector extracting said resource? I am guessing you already know this, but I am not sure what other answer you are hoping for. Kindly elaborate. $\endgroup$ – Giskard Aug 9 '18 at 23:48
  • $\begingroup$ It is beyond most economic model. Because the weakest link in economic study is inability to predict innovation. When some material is abundance and useful, it will sparks research usage on those material, and nobody know how it will affect the price. Take salt as example, it is "precious" in the ancient era, due to poor transportation, controls, etc, the modern day usage on salt hardly push up the price once the production and margin hit the equilibrium. $\endgroup$ – mootmoot Aug 10 '18 at 7:31
  • $\begingroup$ @denesp I was hoping to find a named theory that would be applied in that situation. $\endgroup$ – Arphaxad Aug 10 '18 at 16:53
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At the outset, discovery does not equate availability. Huge amounts of platinum (or the material at issue) might be discovered, but that does not necessarily mean that its extraction is feasible or practicable with the currently available techniques. See here and here.

Assuming that the discovered material is economically available, then supply would increase, thereby pushing prices down. At the same time, demand for that material would increase because agents (consumers) might deem that material a convenient substitute of other [now relatively costlier] alternatives. The net effect would be a higher quantity of that material being traded, and at a lower price.

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  • $\begingroup$ Economists generally use the term "demand" to refer to a function that takes the price as input and gives the amount purchased as output. The amount purchased is referred to "amount demanded". $\endgroup$ – Acccumulation Aug 9 '18 at 19:04
  • $\begingroup$ @Acccumulation Of course, you are right. I just intended tailor my answer to the nature of the question and omit technicalities. However, I would like to emphasize that, in a "more extreme" scenario, even the demand function might change (or in terms of graphics, the demand curve would shift to the right) if the discovery prompts consumers to devise new, additional uses of that material (for instance, by coming up with new ways to substitute other resources/inputs). Think of it as a structural change being reflected by a re-modeling of the demand function. $\endgroup$ – Iñaki Viggers Aug 9 '18 at 19:48

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