Project Part 1 Econ 545

Topics: Supply and demand, Microeconomics, Inverse demand function Pages: 2 (678 words) Published: January 30, 2013
Everyone’s Gasoline Problem
The price of gasoline is definitely driven by the concept of supply and demand. When prices fall, quantity demand will rise, when price rises, quantity demanded will fall. This statement is true in most cases. But gasoline is a necessity to most Americans. The demand for fuel does not decrease when the price increase. Consumers often influence the price of gasoline. Gas prices in the late spring and summer months are the highest during the entire year. These are the periods when consumers drive the most. This is the time when most construction and manufacturing jobs are in operation. Like now, in the winter, gas prices are at the lowest point in a six month period. The six-month gasoline price chart I viewed at indicates this notion. The average price of gasoline in the Chicago area is between $3.25 - $3.70. In the summertime, we were paying gasoline prices of around $3.80 - $4.50. Consumers are deciding to drive less for recreation and more of going straight from point A to point B. The supply of gasoline has increased during the winter months, and producers capitalize on that surplus with the increased driving by consumers in the upcoming spring and summer months, while increasing the price of gasoline substantially. But in the news, you continue to hear of crude oil shortages. Big Oil Companies reported huge profits on high gasoline prices continuously for the past 4 (Froomkin, 2011). The Big Five oil companies made $36 billion in profits in the second quarter of 2011 (Froomkin, 2011). Consumers are now looking for alternative solutions in transportation because of the unsavory price fluctuation of gasoline prices while oil companies post major profits.

Chapter 3 (Question 14)
If Starbucks decided to introduce a new premium blend, the demand for the premium blend will increase. The loyal customers of Starbucks would definitely try this new blend. As the demand for the premium blend...
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