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Causes For Shifts In Supply And Demand

1434 words - 6 pages

Causes For shifts in supply and demandUniversity of PhoenixPrinciples of Economics212AbstractThere are many causes for the shifts in supply and demand of natural resources such as oil. In economics the relationship between sellers and consumers is known as "Demand and Supply". Many variables associated with the demand and supply of oil can cause prices to fluctuate. There is an unending international trade to ensure that we have a consistent supply of oil, and here has been a vast change in the price over the last century yet demand for it remains. Some of the most common reasons for changes in supply and demand in the oil market are availability, capacity of production, politics, and economics.Causes For shifts in supply and demandSupply, Demand and Price ElasticityThe need for oil from every country will never diminish. There is a never ending relationship within many countries to ensure that we have a constant supply of oil. There has been a vast change in the price of oil over the last century yet demand for it remains. It is said that the price differences are a result of the different state taxes, location of the gas stations receiving the gasoline and the transportation cost. Oil is not only considered a raw material but it is being used as a fundamental instrument in order to have company's investments. (Maloney, 2008, para. 1)It is believed that any time the price of the oil is increased there will be a shortage in the demand. As it has been seen for many years, this is not the case. There have been studies made and they have shown that there really isn't equilibrium when it comes to the market. There are many speculations that there was a spike in the price of oil because of the developing countries such as China and India for example. Claiming that they price will eventually reach a balanced threshold but this has proven to be inaccurate. It was believed that with this happening the price would make the consumer purchase less which means the demand would drop. This would then result in equilibrium and the usage would go back to normal with everyone happy.Unfortunately it seems as if there isn't a threshold level that would exist causing a completely different look and the usage and pricing of oil. Many of the companies investing in the oil business have made a decision to raise the prices so that they may adjust to demand of the consumer. The businesses figures it would be more beneficial to have the price set up this way instead of allowing the consumer to make the decisions of what they would like to pay causing the price to adjust downward instead of upward. With this said, it has been seen that as the price of oil has gone up so has the demand from the consumer. Even though there hasn't been equilibrium seen with the price of oil, it is still believed to follow the standard economy demand...

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