The highest and lowest prices of gold last year in October were $1277 and $1265 in that order. On November 17, 2017, Gold is trading at $1286.65 (Goldprices.com, 2017). These prices reveal a great deal of difference between 2016 and 2017. The price of gold has hiked by $9.65 to the highest price and $21.65 to the lowest price of last year. Another interesting difference is that the price of Gold today at 6 AM was $1282.96 depicting a difference of $3.69 (Goldprices.com, 2017). Demand can be one of the major reasons that have influenced the pricing of gold. If the supply of gold had been elastic, then the prices would have soared more than the indicated price. This is because elasticity in economics denotes that a product is responsive to changes such as demand (McConnell et al. 2011). The concept of demand is at the core of the principle of elasticity in the market.
The elasticity of product comes into existence when the percentage change in demand equals the percentage change in price. Therefore, if the supply of gold was in great demand and the price changed as a result, then gold supply is elastic. On the other hand, if the gold supply were inelastic, the prices of gold would have been high than the demand in the market. This is because inelastic products do not respond to the changes in the market. The concept of elasticity has been used in business to develop effective and profitable pricing (McConnell et al. 2011). The gold prices have been rising because the market demand was higher than the supply. Therefore, in this case, they can make more profits. On the contrast, the prices are lowered when the supply is higher than the demand. Hence, elasticity plays an important role in pricing.
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References
Goldprices.com. (2017). Gold prices, gold charts, gold coins guide . Retrieved Online, November 17, 2012, www.goldprices.com
McConnell, C.R., Flynn, S.M., & Brue, S.L. (2011). Economics. McGraw-Hill Education.
