Page 45 - DECO101_MICRO_ECONOMICS_ENGLISH

Micro Economics

Notes Table 1: World Gold Supply and Demand

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
Mine production 1908 2063 2133 2159 2234 2287 2278 2273 2257 2464
Official sector sales - 434 198 111 622 464 81 173 275 406

Old gold Scrap 394 393 530 480 487 574 615 623 640 611
Gold Loans 164 78 5 - - - - - - -
Forward sales 126 115 222 96 156 215 158 466 30 329
Option hedging 63 - 7 15 103 - 57 92 101 18
Implied disinvest- 91 2 - 304 - - 173 - 108 260
ment
Total supply fabrica- 2746 3085 3095 3166 3602 3541 3362 3627 3510 4254
tion
Jewellery 1645 2039 2188 2358 2760 2553 2615 2790 2837 3328
Electronics 207 209 216 205 176 180 191 206 211 237
Official coil (sales) 130 141 123 143 93 117 80 84 63 99

Others 147 152 156 162 178 187 194 210 212 226
Total fabrication 2130 2541 2683 2868 3208 3037 3079 3280 3322 3890
Bar Hoarding 461 530 224 252 282 162 231 306 182 337
Official sector pur- 155 - - - - - - - - -

chases
Gold loans - - - 45 85 65 52 23 5 28
Forward sales - - - - - - - - - -
Option hedging - 15 - - - 35 - - - -
Implied investment - - 188 - 27 242 - 17 - -
Total demand 2746 3085 3095 3166 3602 3541 3362 3627 3510 4254
Gold Price 436.87 380.79 383.59 362.26 343.95 359.82 384.15 384.05 387.87 331.29
(PM fi x,$/oz)
Question
Analyse the effect of demand and supply on the price of gold with the help of demand
supply curves.

3.5 Summary

Supply is the specific quantity of output that the producers are willing and able to make
available to consumers at a particular price over a given period of time.
According to the Law of Supply, more of a good will be supplied the higher its price, other
things constant or less of a good will be supplied the lower its price, other things remaining
constant.

Price is determined by the two forces of demand and supply, in a free market. A point of
balance, where demand equals supply is known as market equilibrium.
A movement along the supply curve is caused by a change in PRICE of the good or service.
For instance, an increase in the price of the good results in an extension of supply (quantity
supplied will increase), whilst a decrease in price causes a contraction of supply (quantity
supplied will decrease).
A shift in the supply curve is caused by a change in any non-price determinant of supply.
The curve can shift to the right or left.

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