price elasticity of gold

8/10/2019 Price Elasticity of Gold

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Introduction

Price Elasticity of Gold

Other

Elasticities

of Gold

Inference


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What is Elasticity

A measure of a variable's sensitivity to a change in

anothevariable.

In

economics,

Degree

to which

consumers/producers change

their

demand/amount supplied in response to price or inc

ome change

Elasticity

=

% change in quantity X

% change in price X

Introduction Price Elasticity of Gold Other Elasticity of Gold In


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According to the law of demand, when price increases, quantity

demanded

varies.

To

answer this question, economists use the concept of

pricdemand.

Price elasticity of demand

is a measure of the

responsiveness of the

quantity of a product demanded by

consumers when the product price changes.

Introduction Price Elasticity of Gold Other Elasticity of Gold I


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For some products, consumers are highly responsive to price changDemand for such products is elastic .

For other products, consumers responsiveness is only slight or in rarecases non -existent. Demand is said to be inelastic .

Introduction Price Elasticity of Gold Other Elasticity of Gold


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Price Elasticity of Gold Other Elasticity of Gold In

Substitutes

the larger the number of substitute goods that are available, the higher the elasticProportion of Income

the higher the price of a product relative to ones income, the higher the elasticity

Luxuries versus Necessitiesthe more that a good is considered to be a luxury rather than a necessity, the

higher the elasticitySwitching Cos t

Introduction


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Relative Elastic Demand : Change in demand > Change in price ,

Relative Inelastic Demand : Change in demand < Change in price

Unit Elasticity : Change in demand = Change in price , Ed = 1.

Perfectly Elastic Demand : Change in demand >> Change in price

Perfectly Inelastic Demand : Change in demand


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Price elasticity of Demand for Gold from Q1Q410

Quarter Year Price ($US bn)Quantity

demanded (in

thousand tons)

Price Elasticity

Q108 450 13.4 NAQ208 521 15 0.76Q308 672 18.8 0.87Q408 548 14 1.38Q109 329 9.6 0.79Q209 431 12.8 1.08Q309 490 15.1 1.31Q409 511 18.1 4.64Q110 521 18.6 1.41Q210 422 16.3 0.65Q310 541 21.3 1.09Q410 575 25.3 2.99


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Price elasticity of Demand for Gold from Q108 toQ410


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Price and Demand for Gold from Aug'13 to Aug'1

Month Price (INR)Quantity demanded

(in tons)1-Aug-14 28760 10801-Jul-14 27815 10501-Jun-14 27847 10741-May-14 26899 8571-Apr-14 28887 9601-Mar-14 28536 9491-Feb-14 30090 10401-Jan-14 29462 9901-Dec-13 28422 9361-Nov-13 30236 10901-Oct-13 29793 10051-Sep-13 30425 11081-Aug-13 32989 1145

Source: http://www.investing.com/commodities/gold-historical-data?cid=49776


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Demand trend for Gold from Aug'13 to Aug'14

Period Quantity demanded (in tons)1-Aug-14 1080

1-Jul-14 10501-Jun-14 10741-May-14 8571-Apr-14 9601-Mar-14 9491-Feb-14 10401-Jan-14 9901-Dec-13 936

1-Nov-13 10901-Oct-13 10051-Sep-13 11081-Aug-13 1145

source: http://www.gold.org/supply-and-demand/gold-demand-trends


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Price elasticity of Demand for Gold from Aug'13to Aug'14

Quantity demanded (intons)

Price (INR)Coefficient of Elasticity

1080 28760 -1050 27815 0.4157644651074 27847 4.47518479857 26899 5.688049594960 28887 2.354947756949 28536 1.576664201

1040 30090 2.369394583990 29462 1.694256757936 28422 0.942350472

1090 30236 1.5590213151005 29793 6.7211411111108 30425 8.2096108491145 32989 1.121289997


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Income elasticity of gold:- With increase in income, demand of gold also increases Cross -price elasticity of gold:

- Silver is the most preferred substitute goods Advertisement elasticity:

- Quantity of gold is not impacted by the advertisement


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Snob effect

Expectation of Future price

Huge number of buyers

The most preferred investment vehicle

Price Elasticity of Gold Other Elasticity of GoldIntroduction


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price elasticity of gold

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