1. The word limit is 1250 (10% up or down)
2. Question-Answer format is acceptable
3. Answer each question separately - there is no need for an introduction or conclusion.
4. Make sure to fully label diagrams; and clearly indicate changes you make to graphs.
5. Specify any assumptions you make and use clear, concise and coherent set of arguments in your discussion/analysis.
6. There is no need to provide actual data/numbers as this is a conceptual exercise.
7. Submit your assignment in Word file (PDF or other format is not acceptable).
8. Support your discussion with appropriate graphs.
9. Hand-drawn graphs are accepted.
10. You can make use of snipping tool to attach your hand drawn graphs to your word file.
11. In accordance with the Division of Business guidelines, assignments submitted late without permission from the course coordinator/s will attract a penalty of 10% of the total possible marks for the assignment per day for each day late, or part thereof, after the due date.
12. There is no need for additional references; however, you can draw upon other references (but cite) in support of any particular arguments you make in your discussion.
13. Need to provide references, using Harvard referencing style.
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AIMS
The purpose of this task is to demonstrate your understanding of the economic concepts and models you have learned in the course in topics 2, 3 and 4 by relating them to a real world situation.
TASK DESCRIPTION Read the article written by Sandeep Dhawan “Factors affecting gold price in India” published in Economics Times India on 25th June 2018. Answer the three questions that follow the article using economic models where appropriate. Answer each question separately and include an introduction and conclusion to the whole assignment. Specify any assumptions you have made and use clear, concise and coherent arguments. Wherever you use ideas from sources to support your arguments make sure you cite them according to UniSA Harvard conventions.
FRAMEWORK FOR EACH ANSWER
1. Identify the key issue in the questions provided.
2. Analyse these key mentioned in the case study, within the context of the concepts discussed in the lectures and textbook.
3. Use the appropriate economic model to illustrate the key issues graphically. Fully label the model and clearly indicate where changes occur.
4. Explain the model and discuss the outcome.
5. Provide the list of references used in answering the questions.
Note:- Failure to cite properly is evidence of academic misconduct, and will result in marks being deducted. Page 7 of 13
NEWS ARTICLE:
Factors affecting gold price in India Economic Times By: Sandeep Dhawan Date: 25th June, 2018
With an annual demand equivalent to about 25 percent of the total physical demand worldwide, India is one of the largest consumers of gold. Traditionally, there is a surge in jewelry demand during the festive and wedding seasons, leading to a rally in gold prices. While the demand for gold has a role to play in its price, there are several other factors that have a bearing on it as well. According to a report by the World Gold Council, annual data from 1990 to 2015, revealed two significant factors affecting gold consumer demand ( jewelry, and bar and coin combined) over the long-term. "All else being equal, gold demand is driven firstly by, income i.e. gold demand is seen to rise with income levels. For a 1 percent increase in income, per capita gold demand rises by 1 percent and secondly, gold price level i.e. higher prices deter gold purchases. For a 1 percent increase in prices, gold demand falls by 0.5 percent." Demand for gold in India is interwoven with culture, tradition, the desire for beauty and the desire for financial protection. According to a study by World Gold Council commissioned by the World Gold Council and Federation of Indian Chambers of Commerce and Industry (FICCI), Indian consumers view gold as both an investment and an adornment. When asked why they bought gold, almost 77 per cent of respondents cited safety of investment as a factor, while just over half cited adornment as a rationale behind their purchase of gold.
QUESTIONS: Please read the article ‘Factors affecting gold price in India’ published on June 25, 2018 and answer the following questions:
Q1 (a). Discuss the factors affecting demand for gold in India. Using the demand and supply model, explain and illustrate graphically the effect of change in demand on market equilibrium price and quantity. In your answer make sure you discuss the equilibrating process, and clearly outline the assumptions in discussing the factors affecting price. (7 marks)
Q2 (a). Use the influences of price elasticity of demand to analyse whether the demand for ‘gold in India’ is likely to be price elastic or inelastic. (3 marks)
Q2 (b). Based on your analysis in Q2 (a) explain and illustrate graphically what will happen to the total revenue of the gold merchants following an increase in gold prices. (4 marks)
Q3. Assume that Indian government has imposed tax on gold trading. Discuss how tax creates inefficiency in the market. Further, based on your answer in Q2 (a) explain and illustrate graphically how the burden of tax will be shared between consumers and producers. In your answer, make reference to the concepts of consumer and producer surplus (7 marks)
Your assignment will also be assessed on how effectively you can communicate with the reader; i.e. how well you have presented your arguments and ensured your analysis is logical and consistent. Consequently, 4 marks will be awarded for effective writing including proper grammar, referencing and formatting. Importantly, make sure you use appropriate diagrams in your analysis. Please check the FAQs for Assignment 2 if you have further questions on this assignment.
Total marks: 25 marks