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Gasoline Economics - Essay Example

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The demand for and the supply of gasoline in the market are determined by some special factors. For example demand is governed by the price of gasoline, the availability of substitutes, price of those substitutes, geographical proximity to the place where substitutes are available, incomes of individuals, prices of automobiles, government taxes on gasoline and Supply constraints such as the availability of oil and gasoline deposits and the rate that new deposits are being discovered, the relative cost of developing such fields and bringing them up to modern supply standards, the government policy on new energy fields and other supply constraints such as rising cost of technology and monopoly…
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Gasoline Economics
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"Gasoline Economics"

Download file to see previous pages According to the above diagram, the positive in demand curve from D1 to D2 will result in increasing in price (P) and quantity (Q) of the gasoline. As a result the supply curve will shift to the right from S1 to S2. Equilibrium is the point where the quantity demanded equals the quantity supplied, thus there's no surplus of goods and no shortage of goods. Initially, E1 is the equilibrium point and due to the increase in demand, equilibrium shows at E2. However after the demand increase supply will decrease and equilibrium point shows at E3.
According to the above diagram, the positive in demand curve from D1 to D2 will result in increasing in price (P) and quantity (Q) of the gasoline. As a result the supply curve will shift to the right from S1 to S2. Equilibrium is the point where the quantity demanded equals the quantity supplied, thus there's no surplus of goods and no shortage of goods. Initially, E1 is the equilibrium point and due to the increase in demand, equilibrium shows at E2. However after the demand increase supply will decrease and equilibrium point shows at E3.



Figure 1: Demand for and Supply of gasoline












According to the above diagram, the positive shift in demand curve from D1 to D2 will result in an increase in price (P) and quantity (Q) of the gasoline. As a result the supply curve
Source: Review of Economics and Statistics, 57(4), 502-07
According to the above diagram, the positive in demand curve from D1 to D2 will result in increasing in price (P) and quantity (Q) of the gasoline. As a result the supply curve will shift to the right from S1 to S2. Equilibrium is the point where the quantity demanded equals the quantity supplied, thus there's no surplus of goods and no shortage of goods. Initially, E1 is the equilibrium point and due to the increase in demand, equilibrium shows at E2. However after the demand increase supply will decrease and equilibrium point shows at E3.
Suppliers adopt their own strategies in order to meet contingency demand by consumers. As a result suppliers tend to change their strategy according to the shifts in demand (Comnor, & Jon, 2001). Assuming a greater degree of pressure on supplier networks coming from greater market demand, suppliers would up their stake in the ultimate outcomes of the corporate strategy and business policy. This is the inevitable result of growing power of big Gasoline organizations becoming more and more independent on to expand business.
(B) Consumer demand and behavior - related to Gasoline

Consumers are very important for the business organization in determining its corporate strategy. For example customers can either make or break a business organization on the basis of demand. The business organization depends on customers' perceptive behavior to such an extent that the former has very little freedom in deciding the corporate strategy and production policy in any other possible way. The Gasoline prices have a big impact on consumer behavior. Thus consumers are not very responsive with their demand related to changes in the gasoline prices. As a result of rising gasoline prices consumers have been forced to cut down on their other needs and wants needed for their day today life. It also reduces savings and real income growth and other forms of consumption such as entertainment, eating out, electronic items, and vacations. Thus that the percentage of income set apart for gas and oil is inversely proportional to income. That is the less a person earns the higher the percentage set apart for ...Download file to see next pagesRead More
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