Supply and Demand and New Price Equilibrium Essay Example
Everyone’s gasoline problem
In the marketplace fluctuations in the supply and demand affect the price of the gasoline and everyone can see the result of that volatility at the pump as the gas price fluctuates accordingly.
When demand for the gas is high retailers raise prices and when demand is low – the prices are driven down. As an example, one can observe that when in need for gas the intersection that has several gas stations would have the same or similar pricing for gas because the supply is high and the prices are contained by competition, however, several miles away where there is only one gas station in the surrounding area and the demand for gas is high but the competition is low –the retailer can set a higher price and the price will be driven up.
Another factor affecting the price of gasoline is the price of the crude oil – the raw material that the gas is produced from. On the marketplace many factors can affect the price of the crude oil and the gasoline that is produces from it -some of which are: * Political tensions in the countries where the majority of the oil is produced * Individual States environmental requirements. As complying with regulations and different oil processing techniques add to the cost of production and the end-product. “There is currently 18 different gasoline formulas produces for the different regions of the country” 1 * Each gallon of gasoline sold at the pump is subject to numerous taxes and fees that vary with each state, thus adding to the price of the gasoline. * Regulatory steps to reduce air pollution while producing the end-product also influence gasoline markets and price. * Competition contains the prices in the areas with abundance of suppliers, as supply is high. * Ethical views of the consumers affect pricing of the product as in the case of British Petroleum (BP)when the demand temporarily dropped due to the crude oil spillage in the ocean and ‘delayed or inappropriate’ handling of
In the marketplace fluctuations in the supply and demand affect the price of the gasoline and everyone can see the result of that volatility at the pump as the gas price fluctuates accordingly.
When demand for the gas is high retailers raise prices and when demand is low – the prices are driven down. As an example, one can observe that when in need for gas the intersection that has several gas stations would have the same or similar pricing for gas because the supply is high and the prices are contained by competition, however, several miles away where there is only one gas station in the surrounding area and the demand for gas is high but the competition is low –the retailer can set a higher price and the price will be driven up.
Another factor affecting the price of gasoline is the price of the crude oil – the raw material that the gas is produced from. On the marketplace many factors can affect the price of the crude oil and the gasoline that is produces from it -some of which are: * Political tensions in the countries where the majority of the oil is produced * Individual States environmental requirements. As complying with regulations and different oil processing techniques add to the cost of production and the end-product. “There is currently 18 different gasoline formulas produces for the different regions of the country” 1 * Each gallon of gasoline sold at the pump is subject to numerous taxes and fees that vary with each state, thus adding to the price of the gasoline. * Regulatory steps to reduce air pollution while producing the end-product also influence gasoline markets and price. * Competition contains the prices in the areas with abundance of suppliers, as supply is high. * Ethical views of the consumers affect pricing of the product as in the case of British Petroleum (BP)when the demand temporarily dropped due to the crude oil spillage in the ocean and ‘delayed or inappropriate’ handling of