Week 11 Final Exam
March 18, 2011
1. When gasoline prices go up many things can happen. There are two things that can happen either people will drive as less as possible or people don’t care and just keep paying whatever the oil company wants. Most of the time people will try an save as much as possible. When that happens the supply usually goes up because the demand will go down because people will try and not buy gasoline as much, however if the people don’t try and save their gas then the supply does down and the demand goes up because people will keep needing to buy gasoline, so the supply will go down. When the demand is high and supply is down that’s what makes the prices go up even more.
When it comes to the externalities associated with high gasoline prices each example is positive and negative at the same time. One example is people will try and drive as less as possible, or car pool to save gas, so they use less gas and there is less cars on the road which means that there is less pollution in the air from cars, which is really good, however, with less cars on the road the oil company won’t have to purchase as much. Another example is that people are going to buy more fuel efficient vehicles like hybrids, so less fuel is being used and with these vehicles on the road the automotive industry will start to lose again because people won’t need to buy vehicles as much.
If gasoline prices keep escalating then that means that they will keep adding to the GDP. I however don’t think that high gasoline prices are going to fix anything. The only thing that I believe that will help the economic well-being when it comes to gasoline prices is by lowering gas prices by opening the oil wells in the United States because if we keep buying oil from other countries, but also get our oil from our own country it will start to make the prices go down and by opening the oil wells here it will create more jobs which is also good for the...