Anyone Good At Economics

[Dai the Socket]

Well I've got set a homework, and I really don't get it.

It's about Palladium, which's price has increased dramatically over the last 5 years but seems quite unstable.

Palladium is used a lot and is needed more and more for Electronic stuff in Japan, USA etc, so price goes up, but people still buy (Price inelastic)

My question says:

Briefly describe the behavious of the price of palladium between 1991 and 1995. Done that.

Then I'm stuck on:

Explain, with the aid of a diagram, the effect on the market of palladium of:

an increase in the demand for platiunum.

I really, really, really don't get it.

Do I do a PED (price elasticity of demand) curve? Or Cross ED to show it between them?

ARGH! Thanks for any help you smart people can give...

Nick

[Hiltop]

is platinum a compliment or substitute good?

if its a substitute in increase in demand of platinum leads to a fall in the demand of palladium. ie demand curve of pallidium shifts left (fall in equilibrium quantity and price)

or vice versa

[Dai the Socket]

Erm. Well since Palladium's made from Platinum, I think it's a complement, but i'm not sure.

What I've worked out so far with Dan Ko :lol: is.

If the demand has gone up for Platinum, then there'll be excess demand, which'll make an increase in price, which'll make suppliers of Palladium change to just selling Platinum won't it?

And if there's movement in supply, and price, then is it a Price elasticity of Supply?

I need to use a Diagram so the question says (8 marks too).

So....

[Hiltop]

if there is an increase in demand for platinum then the demand curve shifts right (ie higher price and increased quantity.)

if palladium is made from platinum, then the cost of production of pallidium will be higher. ie for each price a smaller quantity will be supplied by firms. (less firms will be efficient enough to supply the goods at that price)

this is represented by a leftward shift in the supply curve on a d + s diagram for palladium.

[Simpson]

well what i would take a guess at is that it is a macro economic elastic demand good but i aint learnt past GCSE ignore me if you wish

[matthewholdsworth]

ok i cant show diagrams in post but

as rob says if platinum goes into palladium then the increased cost fo this factor of production will mean that the supply curve for palladium shifts inward (left) and thus increases the price of palladium at all levels of supply and also, reduces consumer surplus (due to higher price) and increases producer surplus.

also i dont know if u want to consider derived demand - the rise in demand for platinum may be as a result of increased demand for palladium.

in terms of complementary im not sure thats true, complementary is like milk for tea, butter for bread.

for 8 marks ul get 4 for a good diagram and 4 for explaining

[Dan Clark]

Platinum and pallidium certaintly sound like complimentary products, I'd say a graph showing the cross price elasticity of the two seems the best bet.

[Tomm]

Erm. Well since Palladium's made from Platinum

No it isn't, they are two different elements. But they are in the same group or "precious metals". That is what doesn't make sense about this question - it requires you to know exactly what Palladium and Platinum are - hardly a prerequisite for an economics student! So I think they must have given you more information in the question or something, unless you've studied platinum before in your economics lessons (Y) .

Even now you know they are different elements in the same group, I don't think you can really answer the question very well without knowing whether they are exact substitutes for each other. I suspect they are not but I don't know. I would say Palladium is probably a competing material with platinum, so if the price of one goes up, demand for the other increase. But I don't know. And I never did economics anyway (Y)

[Bionic Balls]

I think Tomm has got it best so far...

being in the same group..they probably have similar properties and hence are competiting products.

AS tomm said, platinum is definitely an element, and palladium is definitely an element; hence, they are pure materials and aren't made from anything else...

Dang, that's gotta be confusing you...looking at what you thought yesterday anyways...

adam

[matthewholdsworth]

righty then, now they seem to be substitute goods

if the demand for platinum shifts the demand curve outwards and so forces price up, this shift up in prie will be dependent on the demand and supply elasticities, the more inelastic the supply the greater the rise in price.

as the price rises, suppliers of platinum are likely to increase production (providing they have spare capacity), and possibly more firms will enter the market seeing as though existing firms will be making supernormal (monopoly) profits due to rise in price. this shifts the supply curve out. this reduces price and profits and inefficient firms are forced out until the market is perfect again. (sort of)

anyway that may seem a little off track, but....if the suppliers of palladium shift to supplying platinum, to take advantage of higher profits in this market then this will cause a shit inwards (left) of the supply curve in the market for palladium, this means an increase in price in that market. assuming the good is normal and not inferior (this should be obvious) then the increase in price will lead to a fall in demand, in reading your first post, because PED is inelastic, the demand curve will be steeply negatively sloped. thus the market will see a large rise in the price of the good while quantity demanded is going to fall proportionally less than price.

and because of this, IN THE MEDIUM TERM (because as keynes says "in the long run we are all dead"), profits in the market for palladium will rise to be supernormal and firms will enter the market/increase supply and thus return the market to its origional equilibrium..............now this last bit is probably a bit beyond the question.

it depends on the substitutibility of the goods as to whether the increase in demand for platinum, and subsequent price rise causes demand for the substitute good palladium to rise?. this will happen, but again will be more a medium term effect.

i dont know how much of this makes sense or is relavent to your A Levels so if u need clarification or something let me know.

[Clownbike]

I am currently doing an Economics degree and have a 2.1 for my first year :blink:

I'll have a look at it when i have more time. Good luck though :S

[Trebor]

Is it not in short term fixed supply? So you have the vertical supply curve, then a regular demand curve. Because the palladium takes a few months to be produced, so if there's a huge increase in demand, supply can't match it, making the price fly up. As well as increased costs for the producers for converting the platinum?

I'm pretty sure it revolves around that thing, I remember getting a similar question ...

[Dai the Socket]

Right new Question

It's not that hard but I thought I'd double check with the braniacs of TF!

There's a data table of Regional unemployment in the UK from 1990 - 1993.

It shows initially a large range of unemployment regionally at 1990 and then moves towards an increase of around 5% over all, but they're much more similar. Ie all 12-13% rather than before when it was 8 - 13%!

The question is:

"Apart from the data about the geographical distribution of unemployment, what other unemployment statistics would the government require as an aid to economic policy?.

At the moment, all I'm thinking is about the number of people in Frictional Unemployment, as they don't have to kind of account / worry about them as they're not really jobless, just between jobs.

Or is it about benefit claiment count? As some people are unemployed, but economically inactive as they choose not to work ie housewives etc.

Thanks

Nick. x

[Sameer]

sameer is lame.

Edited January 24, 2006 by Sameer

[matthewholdsworth]

sectoral unemployment - different for each industry

international comparisons - eg EU v USA v UK

time series data - is upt increasing or decreasing

how long have people been unemployed - will the need retraining etc degredation of human capital.

unemployment:inflation trade off - i.e. the phillips curve

you can use claimant count or ILO (international labour organisation) measure. would be more accurate to use non-employment data

also look at demography of unemployment - women, etnicity, age etc because different policies are needed to change them all.

the govt needs as much information as it can it can address policy the correct way.

in portugal there is currently a shift from subsistence agriculture to industry, so structural unemployment is the case

need owt else??