Economics Assignment Example | Topics and Well Written Essays - 2500 words - 1

Economics - Assignment ExampleInstead of closing step to the fore contracts with cash settlements, a common procedure on the commodities food market, the Hunts took delivery on silver. They then stockpiled this silver and employ their large cash reserves to buy up even more futures. The billions in demand triggered the wage hike of silver to more than $50 per ounce. (Beattie, 2010)If speculation can have this much of an impact on the bell of a fixed commodity and the silver price plummeted when the Hunt brothers market corner was toppled then the market cannot be totally reliable for an egalitarian distri scarceion of resources. In this instance, a small minority with senseless uppercase reserves could easily create massive market movements in price. It is the same with any commodity if a large capital interest takes hold in the sector and accumulates not from the need of supply, but based on speculation, then the aspects of banking and finance can come to determine even th e price of coffee berry and tea.A free market based upon supply and demand and a free market fuel by speculation may not function in the same manner in determine market prices. If one reviews the ability of a group of brothers like the Hunts to move prices in silver, what could a nation-state, for exercising, happen upon if it were to try to monopolize a sector of commodities, or accumulate from a perception of scarcity. One example of this would be the Chinese State-owned and financed oil companies or loans being given to businesses by State-sponsored banks to buy commodities like copper, thrust up the price.Q.2 - In free market economics, government interference and influence in the economy is rejected, in favor of the pure dynamics of supply and demand being determinant in driving prices, investment, capital flows, and other aspects of trade, manufacturing, and business activity. In this theory, the market operates naturally and