Market Equilibrium Process Paper

It also allows them to consider what the demand and supply determinants for the product or service will be in an effort to forecast any surplus or shortage. A real-world experience that is occurring in the free market today is the supply and demand for gold. According to “World Gold Council” (2012), “The demand and supply dynamics of the gold market underpins the precious metals extensive appeal and functionality, Including its characteristics as an Investment vehicle. ” (Demand & Supply). Gold is used for a variety of reasons and is acquired many ways. The delivery and usage of gold will be depicted in this paper.

Law of Demand and the Determinants of Demand The law of demand tells us that, other things equal, consumers will buy more of a product when Its price declines and less when Its price increases. ” (McConnell, Bruce, & Flynn, 2009, p. 1 14). Today, gold has a demand for technological use, Investment purposes, and jewelry demand. For technological demand, gold has a variety of uses According to “World Gold Council” (2012), “Recent research has uncovered a number of new practical uses for gold, including its function as a catalyst in fuel cells, as well as chemical processing and pollution control.

The potential to use Nan particles of gold in advanced electronics, glazing coatings, and cancer treatments offers promising new areas of scientific research. ” (Demand & Supply). Gold Is also an important demand for Investments, According to “World Gold Council” (201 2), “Since 2003, investment has represented the strongest source of growth in demand. The last five years to the end of 2009 saw an increase in value terms of around 119%. In 2009 alone, investment attracted net inflows of approximately US$41 ban. Numerous factors motivate people and institutions to seek gold investments.

The positive price outlook is underpinned by expectations that growth In demand will continue to outstrip that of supply. Of the key drivers behind Investor demand, one common protect against risk. ” (Demand & Supply). And finally the demand for Jewelry is still considerable high. According to “World Gold Council” (2012), “Jewelry consistently accounts for over two-thirds of gold demand. In the 12 months to December 2009, appetite for Jewelry amounted to around SIS$55 billion, making it one of the world’s largest categories of consumer goods. The 2007-2009 financial crises had a significant negative impact on consumer spending.

This has resulted in the reduced volume of Jewelry sales, particularly in western markets, with the United States being hardest hit. Jewelry demand is driven by a combination of affordability and desirability by consumers. It rises during periods of price stability or gradually rising prices, and then declines in periods of price volatility. ” (Demand & Supply). Each of these demands for gold is both important for the economy and for personal use. Law of Supply and Determinants of Supply “As price rises, the quantity supplied rises; as price falls, the quantity supplied falls.

This relationship is called the law of supply. ” (McConnell, Bruce, & Flynn, 2009, p. 51). Currently, gold is supplied through mine production and recycled gold. There are gold mines operating all over the world. According to “World Gold Council” (2012), “Today, the overall level of global mine production is relatively stable. Supply has averaged approximately 2,497 tones per year over the last several years. The stability of production comes from the fact that when new mines are developed, they’re mostly serving to replace current production, rather than expanding global production levels. ” (Demand & Supply).