Economics - Essay Example

Also, the growing sentiments in the market about conservation of the environment by looking for other cheaper and environment-friendly substitute to oil and gas can likely affect the downward shift in the demand for oil. As consumers begin to become more and more conscious about environmental issues, the availability of substitutes to oil and gas plays a huge role in the shift of the demand. Supply factors. The supply of oil and gas depends is influenced by a lot of factors, which usually involve the so-called factors of production.

For one the supply of oil and gas depends on the level of technology to extract these substances from the earth’s surface, and manufacture them to become end products the consumers can use. The better and more efficient the technology the firms can use to manufacture oil and gas, and then finally deliver it, creates an upward shift in the supply side. The rapid development of information technology enables the firms to further lower down the costs to manufacturing oil and gas. However, the upward shift in the supply of oil due to decreasing costs by improved technology can be offset by the scarcity of oil and gas reserves in the world.

Because the oil and gas reserves are fixed as natural supply, a huge percentage of the known reserves are already exhausted, which would either require more explorations. Equilibrium price. Due to these factors that influence the demand and the supply side of the oil and gas market, the equilibrium price can be expected to relatively go up, as supply factors like exhaustion of reserves have more impact to the price level. The downward shift in the demand drives the price level down, but the downward shift in the supply offsets the lower price.

What is economics? What role does economics play in your personal financial decisions and the decisions your organization