MIcro and Macro Economic Analysis - Assignment Example

Speculations in the prices of oil causes the demand to rise or fall in various times of the year. For example, oil products are greatly demanded in countries experiencing winter because they are used for heating purposes. On the other hand, the supply of petroleum products is mainly dependent on the prices of crude oil, technology and the availability of qualified personnel to extract the products. It is also highly dependent on the political instabilities prevailing in OPEC countries (Etro, 2009).

These countries usually have control on the supply and pricing of the product around the globe thereby affecting the profitability’s of many petroleum companies. b) Explain The Market Structure In Which The Chosen Company Operates With Regards To The Chosen Product The British Petroleum Company is found in the oligopoly structure of the market. This is because there are fewer sellers of the products around the globe. They are also highly sensitive to the other companies pricing along with their strategies of marketing.

In this market structure it becomes very difficult for new entrants to join the market. The sellers in this market structures are always aware of the strategies that their competitors are using. There are several competitors for the company who have branches all around the globe though there are many restrictions that have been placed to bar entrants into the industry. Dealing in petroleum products also requires very high capital and is also a very risky business due to the risks involved (Dunn & Mutti, 2004). c) Explain What The Company Can Do To Continue To Operate In This Profitable Market Structure Or Move Towards A More Profitable Or Sustainable Market Structure In order to continue operating profitably in this market structure, the British Petroleum Company needs to adopt more efficient technologies that aid in their exploration efforts for newer sources of oil.

The company should further invest in the exploration of non-conventional raw materials since the current sources are in very high demand and are nearing depletion. For example, the company can invest in exploring more into the field of oil sans which could yield a lot of untapped resources. These measures will eventually assist the company in countering the uncertainties that fill the pricing of crude oil. For example, the recent civilian uprisings in the Middle East greatly affected the prices of oil around the globe leading some trading companies into encountering losses (Mankiw, 2011). d) Comment On The Different Elasticity Concepts That Can Influence The Pricing Strategy Or The Competitiveness Of The Chosen Product/Company.

The product is affected by various elasticity factors of demand and supply. The elasticity of demand that usually affect the products are the price elasticity, income elasticity and cross elasticity between different companies. The price elasticity usually refers to the changes in the quantities of the products demanded in relation to the changes in the prices of the products. The income elasticity mainly refers to the changes that the company experiences in its income in relation to changes in the demand of petroleum products.

The British Petroleum Company is also greatly affected by the cross elasticity that exists between different firms (Gwartney, Stroup, Sobel & MacPhearson, 2008). This type of elasticity is responsible for measuring the