Econ 545 Quiz 1
Exercise 1
Question 1- Everyone’s Gasoline Problem. We are all familiar with fluctuating prices of gasoline at the pump. Why does this happen? Let’s take a closer look at what it takes to get a gallon of gas into your car. All gas companies follow the same basic formula.
Crude Oil + Refining Process + Retail Sales/Distribution + Taxes = Gas Price
The problem with this formula is not all of these components contribute equally. So let’s take a look at each of these components and what economic impacts have on that mentioned gallon of gas .Crude oil is 69% of the cost and those cost exist of finding it, getting it out of the ground, and transporting it to the refinery. Refining the crude oil cost another 6%. Selling the gasoline is 10% and state and federal taxes are another 15%.
As one looks at the cost of gas you will note that none of the TIPEN will come into place involving the cost of that gallon of gas we put into the tank. But, if we look at the supply cost we notice that in every step of the way PREST does come into play and that is why there is a constant fluctuation in the cost of gasoline. Some of these PREST that are effected is the number of producers, resources prices and production cost, subsidiaries play a big part with all the taxes and government regulations and another expenditure is the constant change in technology.
Exercise 2
Chapter 3 Question 14
If we assume that prime coffee is at equilibrium and supply is constant and the coffee world is perfectly balanced and introduces a new premium blend we would notice that the demand would increase and the supply would not change.
Supply is the quantity of a product producers are willing and able to put on the market at various prices, all other relevant factors being held constant. The law of supply reflects the positive relationship between price and quantity supplied: The higher the market price, the more goods supplied; and the lower the market price, the fewer goods supplied (Stone 76).
Question 1- Everyone’s Gasoline Problem. We are all familiar with fluctuating prices of gasoline at the pump. Why does this happen? Let’s take a closer look at what it takes to get a gallon of gas into your car. All gas companies follow the same basic formula.
Crude Oil + Refining Process + Retail Sales/Distribution + Taxes = Gas Price
The problem with this formula is not all of these components contribute equally. So let’s take a look at each of these components and what economic impacts have on that mentioned gallon of gas .Crude oil is 69% of the cost and those cost exist of finding it, getting it out of the ground, and transporting it to the refinery. Refining the crude oil cost another 6%. Selling the gasoline is 10% and state and federal taxes are another 15%.
As one looks at the cost of gas you will note that none of the TIPEN will come into place involving the cost of that gallon of gas we put into the tank. But, if we look at the supply cost we notice that in every step of the way PREST does come into play and that is why there is a constant fluctuation in the cost of gasoline. Some of these PREST that are effected is the number of producers, resources prices and production cost, subsidiaries play a big part with all the taxes and government regulations and another expenditure is the constant change in technology.
Exercise 2
Chapter 3 Question 14
If we assume that prime coffee is at equilibrium and supply is constant and the coffee world is perfectly balanced and introduces a new premium blend we would notice that the demand would increase and the supply would not change.
Supply is the quantity of a product producers are willing and able to put on the market at various prices, all other relevant factors being held constant. The law of supply reflects the positive relationship between price and quantity supplied: The higher the market price, the more goods supplied; and the lower the market price, the fewer goods supplied (Stone 76).
References: IBIS World. (2012, May). Snack food production in the us: Market research report. Retrieved from http://www.ibisworld.com/industry/default.aspx?indid=271 Stone, Gerald W.. CoreEconomics. Worth Publishers, 07/2011. Wong, C. (Wong , Cathy). Top 5 coffee substitutes. Retrieved from http://altmedicine.about.com/cs/dietarytherapy/tp/080402.htm