Question 1
“India is one of the largest markets for gold. Jewelry demand in India between July to September
fell 48% year-on-year to 52.8 tonnes from around 101.6 tonnes a year earlier, the [World Gold
Council] said in a report. But demand for gold as an investment rose 52% to 33.8 tonnes on-year.
[…] The precious metal plays an important role in India’s culture — it’s considered auspicious to
buy gold during festive occasions or to give gold jewelry as a gift at weddings. It is also seen as a
symbol of affluence and a safe investment. [Somasundaram PR, managing director for India at
the World Gold Council] explained that demand for gold between July to September tends to be
relatively low, driven by seasonal factors such as monsoons and inauspicious periods. The drop
in demand for gold jewelry was also due to many festivals and weddings being canceled or
postponed due to the coronavirus pandemic that has infected more than 8 million people in
India. “On the other hand, gold’s safe haven attributes and an anticipation of price rise paved the
way for an increase in investment demand for gold bars and coins,” he added.” (www.cnbc.com,
accessed on 30
th October 2020)
REQUIRED:
Demand for gold arises from both consumption and investment reasons. How does a drop of
demand for consumption of gold (as the one experienced in India between July to September
2020) affect the price of gold? You are required to illustrate your answer also through diagrams
(i.e., demand and supply curves).
30 marks (approx. 800 words)
Question 2
“Aging of the population is a cause of the rising costs of healthcare but a minor one compared
with the main driver that much more can be done and that most of what can be done costs more
than what used to be possible. This is what economists call “supply-drive demand.” You build
hospitals, intensive care units, roads, prisons, and medical schools and they promptly fill up. You
develop new, highly-expensive treatments, and people want to use them. As a healthcare leader
once said to me, “The main cause of the increase in healthcare costs is the National Institutes of
Health.” (Richard Smith, former editor of the British Medical Journal; https://blogs.bmj.com,
accessed on 30th October 2020)
REQUIRED:
Explain why, according to the ‘supply-drive demand’ argument, an increase of supply triggers an
increase of demand for a good or service. Does this argument always hold across industries and
services – such as, for example, hospitals, intensive care units, roads, prisons, and medical
schools? You are required to illustrate your answer also through diagrams (i.e., demand and
supply curves, cost curves).
Question 3
“The EU antitrust regulators launched on Monday (5 October) another investigation to clamp
down on anti-competitive business practices that led to a ‘canned vegetable cartel’ in the
European food market. According to the European Commission, Italian agricultural cooperative
Conserve Italia agreed for several consecutive years with other market participants to fix selling
prices, share markets and allocate customers “for the supply of certain types of canned
vegetables to retailers and/or food service companies.” […] This specific case is linked to a bigger
one which brought to light the existence of cartels and restrictive business practices in the canned
foodstuff sector all across Europe, dating back to the early years of the 2000s. Last year, the
Commission found that French agriculture cooperatives Bonduelle and Groupe CECAB, as well as
the Dutch company Coroos, participated for more than 13 years in a canned food cartel in the
European Economic Area (EEA). […] After having admitted their involvement in the cartel, Coroos
and CECAB agreed to settle the dispute by paying a fine of more than €31.6 billion, while
Bonduelle was pardoned for having revealed the existence of the cartel to the Commission.”
(www.euractiv.com, accessed on 30th October 2020)
REQUIRED:
What are the conditions that give rise to business cartels like the one of canned vegetables in the
EU, and those conditions that can make a cartel break up?