"Soaring gold prices have generated a favourable taste for designer silver ornaments among the middle class society"- Business times report.
Analyse the above statement with the help of an economic theory and explain its impact on the market of silver ornaments (6 marks)​

Dear Student

Gold and silver are both precious metals and can be treated as close substitutes even if not perfect ones . In the middle class society demand for gold is quite elastic . As gold prices are soaring higher than silver people are substituting silver ornaments for gold . This phenomenon can also be termed as the elasticity of substitution of gold and silver is quite high . In the silver market demand for silver rises and supply is also expected to rise . But if this excess demand in silver market cannot be met with sufficient supply then there can be an inflationary pressure which will make the price of silver to rise .

Regards .

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