Question

In: Economics

Go to the internet and find a news article published within the last month that discusses...

Go to the internet and find a news article published within the last month that discusses changes in demand and supply of particular goods/services, summarize key points and post in the Discussions area.

Use specific economic vocabulary within your summary, i.e. demand, quantity demanded, determinants of demand, shifts in demand curve, etc. Likewise with supply. Also you should discuss changes in equilibrium quantity and equilibrium price.

The article you choose may not use these exact terms; therefore, it is incumbent upon you to convert the article language into economic language as is appropriate.

Include a reflection -

-  Using macroeconomic terminology, reflect on specifically what is learned from the assignment and how it could apply to accounting

Solutions

Expert Solution

Hi,

I hope you are doing well!

Question:

Answer:

Demand: Demand is an economic principle referring to a consumer's desire to purchase goods and services and willingness to pay a price for a specific good or service. Holding all other factors constant, an increase in the price of a good or service will decrease the quantity demanded, and vice versa.

Quantity Demand: Quantity demanded is a term used in economics to describe the total amount of a good or service that consumers demand over a given interval of time. It depends on the price of a good or service in a marketplace, regardless of whether that market is in equilibrium.

Determinants of demand:

Determinants of demand means which of the factors affects the demand. Five of the most common determinants of demand are the price of the goods or service, the income of the buyers, the price of related goods, the preference of the buyer and the population of the buyers.

Shift in demand curve: Demand curve can shift right of left. Like, Changes in factors like average income and preferences can cause an entire demand curve to shift right or left. This causes a higher or lower quantity to be demanded at a given price.

Supply: Supply is a fundamental economic concept that describes the total amount of a specific good or service that is available to consumers.

Equilibrium quantity and equilibrium Price: The equilibrium price is the market price where the quantity of goods supplied is equal to the quantity of goods demanded. This is the point at which the demand and supply curves in the market intersect.When the supply and demand curves intersect, the market is in equilibrium. This is where the quantity demanded and quantity supplied are equal. The corresponding price is the equilibrium price or market clearing price, the quantity is the equilibrium quantity. Quantity supplied is equal to quantity demanded.

Now Come on the case study and analysis:

I will discus about a article of FICCI regardind Gold (as a commodity) in crisis:

This article was based of the price, demand and supply of gold in COVID-19 crisis. We all know that gold prices reveal the true state of economic health. When gold prices are high, that signals the economy is not healthy. Gold is traditionally seen as a safe investment, especially during a time of financial uncertainty, high inflation, depreciating exchange rates and economic recession. During this kind of crisis, gold makes a very good investment. During a recession, gold is seen as a better investment than say the stock market.Investors buy gold as protection from either an economic crisis or inflation. Low gold prices mean the economy is healthy making stocks, bonds, or real estate more profitable investments.

Summary of article:

Over the past five years, annual demand has averaged 895 tonnes, equivalent to 26 per cent of total physical demand worldwide.Indian consumers buy gold as an investment and for adornment. More than 75 per cent of respondents perceived gold as a safe investment and 53 per cent consider it primarily an adornment.Gold is part of an Indian households’ regular expenditure. The purchase of jewellery and coins comprises 8 per cent of daily consumption, only marginally behind medical expenses and education.Gold demand is not dependent on price fluctuations. Among respondents, 34 per cent said their behaviour would not change if the gold price increased and 20 per cent said they would buy more under such circumstances. • While almost half our respondents said they would buy gold if the economy was growing and 22 per cent said they would sell if the economy was in recession

However, as India has little domestic supply of gold, demand is primarily satisfied by imports. The cost of these imports is partially responsible for today’s current account deficit (CAD). India is the only country whose prime sources of gold supply (mine and old scrap) would meet barely 10 per cent of physical demand. The import of gold is increased year by year.

Domestic recycled gold increased 29 per cent to 116 tonnes in 2009, following a sharp spike in gold prices. Recycled supplies rose from 59 tonnes in 2011 to 113 tonnes in 2012 and 101 tonnes in 2013, following government restrictions and a depreciation in the rupee. Moreover, our survey reveals that Indian consumers are willing to recycle their gold, armed with appropriate incentives.

Demand od gold in India is derived by- Combining Security and Beauty, Protection Against Volatility, Part of the Family Budget, A Trusted Asset, Easy to Understand etc.

Gold price performance in India- in 2008- 28.8%, 2014- 0.8%, 2020- 21.6%.

Conclusion:

So, we have found the following notable thing in this essay:-

a). Demand of gold is higher than supply of gold in India.

b). Price of gold is growing on regular basis.

c). People treat as a safest asset.

d). important asset class for investment.

e). Use of jewellery is very high.

f). Supply of gold is 90% depend upon import.

So, we can conclude that higher the demand and lower the supply of gold and highly depend upon import is the reason of growing price of gold in India. Other factors related to economy and investment also affect the price of gold. During the recession of 2008 and 2020 Gold price performance in India ( in 2008- 28.8%, 2014- 0.8%, 2020- 21.6%) higher than 2014(normal situation) also indicate the higher demand ( because of safest and trusted asset).

We know the demand of gold is always higher than supply (demand will increase more than increasing of supply). Equilibrium of price and quantity will also change during 2008, 2020 and 2014. in 2008 demand curve shift to right and during the 2014 demand curve will shift left. so both the time price will be change and Equilibrium quantity and equilibrium Price will change also.

Learning and implementation:

We have learned from this assignment that-

a). Gold is a safest and trusted asset class.

b). If demand is increase than supply then price is increased and vice-versa

c). During the recession people sifted from other assets class to gold.

d). Demand is affected by many factors.
e). Equilibrium quantity and equilibrium Price is change with changing in demand, supply and price.

I will apply it to understand the trend of price, equilibrium stage, investment during recession and boom. Like, will invest in gold during crisis, will buy gold when demand will less than supply, when demand or supply or price will change then i will wait for equilibrium stage for understand the stability.

Thank You


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