Applying Business Concepts to Current Events - Essay Example

Section The article which has been selected is: ‘Is gold worth investing in at its current high prices’ by economic times’ (ET, This article illustrates basic economic concept of demand and supply with price factor. It explains how price of a product is determined by the demand. Increase in demand with limited supply leads to increase in price. Increase in price leads to decline in demand again to decline in demand with constant supply. In case the supply eased, price of the product is also eased.

This article illustrates demand and supply concept with reference to Indian economy. Where rise in demand of gold led to increase in price. This rise in demand for gold had underlying factor of weakening Indian economy (Indian Express). Local demand for gold declined due to price. But increased parity of Indian and US currency led rise in gold demand in India where international investors jumped in to take benefit of this parity and invested in gold in India. It also explained the reason of rise in price in international market.

This rise in price was due to the limited global supply of gold and increasing demand. From the article it can also be concluded that the demand is due to declining opportunities (substitutes) to invest. Hence, demand in gold is due to substitute effect it is has over other investment options (ET). Demand and supply relation was also evident from the availability (supply) of investment options. Since due to worsening global conditions in economic terms and rising concerns over sovereign debt crisis in Europe reduced the available safe investment options like Euro, dollar etc , demand for gold rose.

This demand for gold was also characterized by the benefits it offer to investors in terms of being safety and less risky than other investment options. Therefore, price of gold rose due to increase demand of benefits gold offer as well as limited supply of gold. It helps understanding how the demand for a particular product can rise due to various reasons. This rise in demand can be solely for the rise in demand for the benefits particular product offers as well decline in demand of substitute products.

It also explained the reason of rise in price with respect to demand. Impact of supply that determines the price at particular demand level is also evident from the articles. Section # 2: The article which has been selected is: ‘UK recession deepens after 0.7% fall in GDP’ (BBC, 2012) This article highlights the concept of business cycle as it illustrates the recessionary state of economy which is a constituting component of business cycles. Global economy is currently facing recession. State of economy is measured by total output produced by an economy in terms of gross domestic product, commonly known as GDP.

Decline in GDP is due to decline in overall demand from the economy. The declining demand leads to less production required, takes investment down, leads to less labor required and leaving people unemployed. Unemployed people do not have money to buy things which further reduces demand and overall condition worsens. In business cycle, against this state of economy is recovery where all steps move in opposite direction. This article sheds light about the factors which led to deepened state of recession in UK economy where GDP fell by 0.

7% between April and June 2012 (BBC). This article points to the factors that turned the economy fragile and increasingly vulnerable to deteriorating situation, to mention, euro-zone crises and reduced construction level being the leading factors. It also referred how countries invest in infrastructure to boost the economy back on track of growth for recovery. As mentioned in article, slowed down construction activities had an added effect on the declining GDP. Government increased construction to push the economy up.

Another measure that is applied to reduce impact of recession is to lend to private sector at lower interest rates. This measure results in reduced cost of production which ultimately reduces the price of products and enables people to buy with less purchasing power. Impact of this was seen in Olympic investment as short term boost to economy. The article puts emphasis that short term measures like Olympic are not enough to provide required push and the movement across growth on business cycle is requires consistent efforts.

This article help in understanding the recession phase of economic cycle. It also explains the impact over economic growth trend based on happenings around the world. Positive economic happenings drive the economy towards recovery whereas negative happenings pose speed breakers in its growth path. It also identifies the importance of public investment and multiplying positive impact from construction sector that takes multiple industries on run along with it. It implies that recessionary phase of business cycle is very tough and it requires persistent efforts to regain the growth momentum.

Works Cited BBC. UK recession deepens after 0.7% fall in GDP. BBC News. Jul. 2012. 3 Oct. 2012. ET. Is gold worth investing in at its current high prices? The Economic Times. Jun. 2012. 3 Oct. 2012. Indian Express. Rising price of gold could mean falling current account deficit. The Indian Express. Aug. 2012. 3 Oct. 2012.