Econ Project

Econ Project - GENERAL EDUCATION PROJECT Market Study of...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
GENERAL EDUCATION PROJECT Market Study of Petroleum, Oil, Gasoline, and Alternative Fuels Econ 002 - Section 001 - Group 173: Taylor A. Larouche tal5041 Mark A. Mizzer Jr. mam5514 Reinhilde R. Robinson rrr5054 Jonathan J. Tate jjt5029 Contents: I. Introduction II. Analysis III. Summary IV. Division of Labor V. Works Cited
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
D D’ S P P* P** Q* Q I. INTRODUCTION: Petroleum is a naturally forming liquid pooled in various densities inside the Earth’s crust. Fuel oil, burned generally in furnaces, boilers, or engines for the generation of heat or power, and gasoline, used in internal combustion engines such as automobiles, are derived from petroleum through different distillation processes and are primary sources of energy for the United States. That is to say, oil and gasoline are outputs of petroleum; hence, if the price of petroleum, gasoline, or oil increases, it is safe to say that the prices of the other two goods increase as well. Alternative fuels are fuels derived from any materials that can be used as fuel other than the conventional sources. An example of such an alternative is ethanol. Ethanol, also known as grain alcohol, is a colorless liquid that has slowly been turning the fuel and automotive industries into completely different playing fields than in years past. Ethanol is made from corn grain starch and sugar cane, with corn grain starch being the most popular component for the making of ethanol in the United States. It is gaining popularity for being both a renewable and domestic bio-fuel. Ethanol is becoming more widely used and demanded by consumers, as it not only is a cleaner way to fuel engines but also generates more power in an engine. In the past seven years, “the number of ethanol plants more than doubled and production capacity tripled in the United States” (“Alternative and Advanced Fuels”). Therefore, the markets for corn have grown significantly larger. Alternative fuels such as ethanol are substitutes to the traditional fuel and energy market. Oil and gasoline prices have risen significantly in the past years, so naturally the demand for alternative fuels (i.e. ethanol) have increased considerably as well. Petroleum prices began their dramatic increase in 2000, and it is no mistake that the demand for ethanol, and therefore the production of it, also began its increase in the same year. We can conclude that as long as the price of oil continues to increase, the production of ethanol will continue to rise. As substitutes, an increase in the price of one good causes an increase in the demand for the other. Since oil prices are increasing, consumer demand in the ethanol market is increasing and the government is giving subsidies to the expansion of ethanol. The demand for ethanol, hence the demand for corn, is increasing. Shown in the supply and demand graph of corn to the right, the positive shift in the demand will raise the equilibrium price and the equilibrium quantity of corn.
Background image of page 2
II. ANALYSIS OF SUPPLY AND DEMAND IN THE MARKET:
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 10

Econ Project - GENERAL EDUCATION PROJECT Market Study of...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online