demand elasticity
Demand elasticity
Supply internal external factors influence Economics for Business
“Oil prices are high and constantly changing, but alternatives fuels are not an evident choice for motorists. Assume that oil begins to run out and that extraction becomes more expensive. Trace through the effects of this on the market for oil and the market for other fuels”
This essay will examine the impacts of what diminishing oil supplies and rising extraction costs will have on both the market for fuels and alternative fuels. A market can be defined as a set of all actual and potential buyers of a product or service (Reference website)
It will also look to examine in depth the effects in which this situation will have on both markets in terms of supply, demand and elasticity, Elasticity is a measure of the responsiveness od demand to a change in price. (Begg, D, & Ward, D, 2009,pp.36)
Beginning with demand, demand is the quantities of a good or service that will be demanded over a period of time. Starting specifically with the demand for oil which is one of the world’s most precious resources and is extremely highly demanded, which therefore creates one of the fundamental economic problems between peoples unlimited want for oil versus a finite quantity of oil. Therefore shortages, coupled rising extraction costs will result in varied impacts on the oil market in terms of demand. Oil is a product which is seemingly inelastic; a product is “inelastic if a change in the price will lead to a proportionately smaller change in the quantity demanded”. (Begg, D, & Ward, D, 2009,pp.38) This conclusion is based upon a series of determinants of elasticity.
Firstly the numbers of substitutes, substitutes are rival products; for example, a BMW car is a substitute for a Mercedes, or a bottle of wine from France is a substitute for a bottle from Australia.” (Begg, D, & Ward, D, 2009,pp.31) Oil has no substitutes which provide motorists with an adequate fuel for transport therefore
Supply internal external factors influence Economics for Business
“Oil prices are high and constantly changing, but alternatives fuels are not an evident choice for motorists. Assume that oil begins to run out and that extraction becomes more expensive. Trace through the effects of this on the market for oil and the market for other fuels”
This essay will examine the impacts of what diminishing oil supplies and rising extraction costs will have on both the market for fuels and alternative fuels. A market can be defined as a set of all actual and potential buyers of a product or service (Reference website)
It will also look to examine in depth the effects in which this situation will have on both markets in terms of supply, demand and elasticity, Elasticity is a measure of the responsiveness od demand to a change in price. (Begg, D, & Ward, D, 2009,pp.36)
Beginning with demand, demand is the quantities of a good or service that will be demanded over a period of time. Starting specifically with the demand for oil which is one of the world’s most precious resources and is extremely highly demanded, which therefore creates one of the fundamental economic problems between peoples unlimited want for oil versus a finite quantity of oil. Therefore shortages, coupled rising extraction costs will result in varied impacts on the oil market in terms of demand. Oil is a product which is seemingly inelastic; a product is “inelastic if a change in the price will lead to a proportionately smaller change in the quantity demanded”. (Begg, D, & Ward, D, 2009,pp.38) This conclusion is based upon a series of determinants of elasticity.
Firstly the numbers of substitutes, substitutes are rival products; for example, a BMW car is a substitute for a Mercedes, or a bottle of wine from France is a substitute for a bottle from Australia.” (Begg, D, & Ward, D, 2009,pp.31) Oil has no substitutes which provide motorists with an adequate fuel for transport therefore