The Price of Fear - Demand and Supply - Essay Example

This paper discusses how the feeling of a civil war was felt in Bahrain and Saudi Arabia due to the possibility of revolts in the two countries. This paper tells us that Saudi has so much oil that it could inject it into the economy at any time to reduce the global oil price. This concept is of basic demand and supply and we can understand here that the price would fall since as more levels of oil would be supplied than demanded, equilibrium would then be reached at a subsequently low price by the interaction of the demand and the supply curve.

Further on this article discusses how customers adjust the rising oil prices. Since oil is an essential commodity, its demand, therefore, is inelastic. Consequently, as prices go up, producers of oil raise the price and make more profits and the customers would still buy it since they have no option but to use it, it being a necessity for life. This makes it clear that for goods that have an inelastic demand, their prices can easily be raised and the producer makes a decent amount of money on it. Read More