Economic Policy and the Global Environment
BCS12 Class A
Student ID: 09139397
Lecturer: Mr. Rodney Sim
"The price of gold has increased from less than US$700 per ounce in 2007 to more than US$1,000 per ounce in 2009."
Discuss and explain with graphical illustrations, how the following events will lead to changes in the demand and/or supply curves for gold, assuming that gold market is perfectly competitive.
Clearly state whether the price and quantity traded rise or fall or cannot be determined after the event (i.e. price or quantity traded can increase, decrease or remain the same).
A new and efficient technology for mining gold has been discovered in South Africa, one of the biggest gold producers in the world. In the mean time, more people are buying gold around the world to hedge against high inflation in their economies.
Several governments in Asia have decided to impose a gold tax on suppliers to reduce excessive speculation of this metal. In the mean time, the price of silver (considered by consumers as a substitute of gold) has fallen sharply.
Many suppliers respond to rising price of silver in their production decision, as they can use the same equipment to mine both gold and silver. In the mean time, the fashion of wearing gold jewellery gradually comes to an end in most societies.
New industrial use for gold has been discovered. In conjunction with this, many governments around the world cut down on the number of licence issued for gold mining activities, to avoid further destruction of the eco-environment.
The study of economics centres upon the problem of scarcity. Explain what is meant by this problem and assess whether the use of economics can solve the problem.
Economics is the social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices.
Scarcity means that society is relative to the human desire, economic goods, or production of these items required resources are always insufficient.
And because we face scarcity, we must make choices. Choice is how to use the established resource to produce economic produces, in order to better satisfy human needs. It contains "produce what", "how to produce" and "produce for whom" three questions. Cause the scarcity is the problems which the human society each period faced. Therefore, "produce what", "how to produce" and "produce for whom" is the basic problems which human society must be solved. And economics is to solve these problems.
And sustainable development is also need. Since 20 century, the world economy has obtained by leaps and bounds development. But there also had a series of problems. Such as the global fast...