GM545: Business Economics
March 5, 2012
This is a very interesting question to discuss. Gas prices are always fluctuating and at the moment we are experiencing all time high gas prices at the pump. I live in Southern California in Orange County which is a nice area. The city that I currently live in which is Irvine has many gas stations throughout. Near my house, I have four gas stations surrounding me. These gas stations are Arco, Shell, Mobil and Chevron. Arco seems to have the cheapest prices at all times in respect to the other gas stations. Some say that it is due to the cheaper quality of gas that they use. Chevron has the most expensive prices in ...view middle of the document...
Due to lack of supply and the high demand, prices have been increasing at the pump significantly. Technically, demand for gas should be going down as prices go up, however the demand for gas is inelastic meaning that people will not decrease their demand for gas as prices shift in either direction and there is no substitute for gas currently.
Chapter 3 Question 15
First off, orange crops were completely destroyed due to the arctic freeze in California and in Florida the crops were smaller. This means that there were fewer oranges available for consumption. In other terms, the supply of oranges decreased which I turn would lead to a higher price paid for oranges. Oranges will become more expensive due to the lack of supply and orange juice would also go up in price since is it dependant on oranges.
An increase in corn and grasses means that the demand will certainly increase. If the demand increases then the price is likely to increase as well. However, since there is uncertainty around how long it takes to grow the grasses and collect them the price might increase temporarily until there is more grass grown which would increase supply again and bring both demand and supply back in equilibrium. In both scenarios we are going to see a price increase.
Chapter 5 Question 17
a) I think that a rise in demand for potato chips...