Econ Essay

1824 words - 8 pages

Econ545 Paper
Business Economics GM545 Spring 2011

Everyone’s Gasoline Problem. We are all familiar with fluctuating prices of gasoline at the pump. Why does this happen? Research the recent history of gasoline pricing in your area, and attempt to relate any fluctuations you observe to documented supply and demand factors, as outlined in our book. By the end of the 6-week period of November 19th –December 31, gas prices in Chicago had risen significantly. In it’s bi-monthly newsletter at the beginning of January 2011, the Lundberg Survey, a report which tracks gas prices, points to Chicago for the highest gasoline prices nationally topping the charts at an average of $3.35 per gallon for ...view middle of the document...

The increase in consumption in Chicago during the period of November 19th – December 31 is due to a combination of cold weather, holiday shopping and traveling. Many people will opt to drive their cars versus using public transportation on cold winter days. Chicagoans shivered through an abnormally cold December 2010--that should come as no surprise--but the actual numbers are startling. With an average temperature of 21.1 degrees through the 27th, December currently stood as the coldest in ten years (2000 was colder), and the 13th coldest since the inception of Chicago's official temperature records 141 years ago (in 1870) (4). With more people driving we saw an increase in the buyers of gasoline, which increased the demand.

During this time period there are holiday shoppers hitting the stores for gifts. The success of retail stores is an indicator of whether or not more people are out shopping *driving” during the holiday season. Retail sales rose a solid 4 percent for the 2010 holiday shopping season, marking the first uptick in two years, according to a report released Monday from ShopperTrak (5). So, an increase in retail sales indicates an increase in gas consumption and gas demand, which played a part in driving up gas prices up.

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Chapter 3, Question 14 As the demand rises from Starbuck’s introduction, there is a change in demand due to more buyers and/or taste and preferences so the demand curve shifts up and to the right. Since Starbuck is an additional supplier, supply will increase and the supply curve will shift down and to the right. In this event both supply and demand increase so there will definitely be an increase in output. Price is uncertain but if demand is significantly more than supply, the equilibrium price will rise but if the supply as more growth the price will fall. If Brazil’s premium coffee crop is eliminated by a freeze, there will be a decrease in supply. With the cause of this decrease being less sellers, the supply curve will move to up and to the left. This will cause a increase in equilibrium price and a decline in output but demand will not necessarily change.

Chapter 3, Chapter 15 The production and output of orange is being reduced so there will be a decrease in supply. The supply curve will shift to the left. Also, there will be a shortage and the price of oranges will increase. Since these are both important suppliers, the price will rise significantly. There will be expectation of the shortage once the news of the freeze and reduction of production. This will also cause a somewhat of a panic reaction, as oranges will begin purchased at larger amounts to avoid the higher prices following the shortage. On the other hand the production of corn will increase. There will be an increase in the production of cornIf the consumption of gas declines the equilibrium price of gas will fall. Now the because of Bush proposal we will see a surplus as far as corn because there will more than consumers are...

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