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Gold Elastictity

  • Date Submitted: 08/27/2012 12:58 AM
  • Flesch-Kincaid Score: 56.5 
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1. INTRODUCTION
Economics may appear to be the study of complicated tables and charts, statistics and numbers, but, more specifically, it is the study of what constitutes rational human behavior in the endeavor to fulfill needs and wants.
As an individual, for example, you face the problem of having only limited resources with which to fulfill your wants and needs, as a result, you must make certain choices with your money. You'll probably spend part of your money on rent, electricity and food. Then you might use the rest to go to the movies and/or buy a new pair of jeans. Economists are interested in the choices you make, and inquire into why, for instance, you might choose to spend your money on a new DVD player instead of replacing your old TV. They would want to know whether you would still buy a carton of cigarettes if prices increased by $2 per pack. The underlying essence of economics is trying to understand how both individuals and nations behave in response to certain material constraints.

  2. THE ELASTICITY
In economics, elasticity is the measurement of how changing one economic variable affects others. In more technical terms, it is the ratio of the percentage change in one variable to the percentage change in another variable. It is a tool for measuring the responsiveness of a function to changes in parameters in a unit less way. Frequently used elasticities include price elasticity of demand, price elasticity of supply, income elasticity of demand, elasticity of substitution between factors of production and elasticity of intertemporal substitution.
Elasticity is one of the most important concepts in neoclassical economic theory. It is useful in understanding the incidence of indirect taxation, marginal concepts as they relate to the theory of the firm, and distribution of wealth and different types of goods as they relate to the theory of consumer choice. Elasticity is also crucially important in any discussion of welfare distribution, in...

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