Economics Assignment, The Market for Rhodium Essay

Economics Assignment, The Market for Rhodium - Essay Example Now if the prices remained same of palladium and rhodium, the demand for rhodium might increase at higher ratio than palladium because of the difference in the prices. Due to low demand of palladium, its price was decreased by the company which increased its demand. Due to increased demand for palladium, the demand for rhodium has fallen to large extent in the auto catalyst use. Because the demand for antipollution chemical has aroused only in the auto catalyst industry while the consumption of rhodium and palladium by other industries remained same. Now when the price of rhodium has fallen there is a big difference in the demand for rhodium in auto catalyst industry as compared to other industries. As auto catalyst is the major consuming unit of antipollution chemicals so demand has fallen for rhodium particularly in it due to increase in demand for palladium. Hence the trend of demand for rhodium has fallen. In the above diagram, DD is demand curve for year 2001 with demand 557 and price 1829.79 approx. D^D^ is the demand curve for year 2000 having average price of 2025.47 and demand 809. The difference between total demand has caused the price to move also. Ans.: The demand for rhodium as compared to palladium reduces in resulting of cross price elasticity. It shows that the price of palladium has been reduced by the company to reduce the pollution in the car exhausts. The greater demand of antipollution chemicals in the society enforces the company to reduce the price of palladium in order to increase its demand as compared to rhodium. The company decreases the price of palladium which greatly affects the demand and price of rhodium. Because of decreased prices of palladium, the demand for rhodium has also decreased which ultimately causes its price to be decreased. Hence due to the decrease in the price of palladium the price for rhodium has also decreased. Subsidization of industries can play an