ECON312N Week 2 Discussion Latest 2019 September

ECON312N
Principles of Economics

Week 2 Discussion

Demand, Supply, and
Market Equilibrium

Required Resources

Read/review the
following resources for this activity:

Textbook: Chapter 4, 5

Lesson

Minimum of 1 scholarly
source

Introduction

In a market-oriented
economy, a change in the price of a product is usually caused by changes in the
factors that affect the demand and/or the supply of the product and the price
elasticity of the demand for and the supply of the product.

Consider the market
for crude oil. As you know, changes in the price of crude oil affect just about
everything that is made, transported, eaten, and sold in the United States. For
example, a change in the price of crude oil is likely to affect the prices of
products like jet fuel, gasoline, diesel, home heating oil, just to name a few.
There is a strong correlation between the price of crude oil and the price of
gasoline. The Organization of Petroleum Exporting Countries (OPEC) is the
largest group of crude oil producing countries in the world. According to
Statistica (2018), the average annual OPEC crude oil price has risen steadily
from 2016 to 2018 as follows: $40.68 (2016), $52.51 (2017) and $67.33 (as of
July 24, 2018). With the significant improvement in the economies of the U.S
and other global economies and recent geopolitical events around the world, the
price of crude oil is likely to continue to rise in the foreseeable future.

Initial Post
Instructions

For the initial post,
address the following:

Considering the demand
and the supply sides of the crude oil market, provide a comprehensive analysis
of domestic and international factors that may be driving the increases in the
price of crude oil since 2016.

If the price of crude
oil continues to increase, how will the increases affect your buying behavior
in the short-term and in the long-term, considering that the demand for most of
the products derived from crude oil are typically inelastic?

Explain how changes in
the price of gasoline affect your buying behavior of related goods like cars,
the use of public transportation, vacations etc.?

Research shows that
the demand for gasoline is inelastic. Suppose the price of gasoline continues
to rise into the foreseeable future, as predicted. How would your purchases
change in the short-term and in the long-term? Explain.

Suppose you have
become very informed and convinced about the harmful effects of carbon
emissions on both the environment and on public health. Will this newly
acquired information change your demand for gasoline or the quantity of
gasoline demanded? Explain.

Will the increase in
the production of affordable electric cars change your demand or quantity
demanded of gasoline? Explain.