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3_Supply_Demand

3_Supply_Demand - Supply Demand Supply Readings Zagorsky...

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Supply & Demand Supply & Demand Readings Zagorsky: Chapter 2
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Introduction Energy, power, fuel these words describe key parts of the modern macro-economy’s foundation. While a few hundred years ago people walked or ran from place-to-place, today many people drive themselves in cars or trucks. A few centuries ago there were almost no tall buildings, even in the largest cities, and the tall structures that existed were bell or clock towers that few people needed to climb. Today skyscrapers, built around elevators which whisk people from ground to lofty heights in seconds, are prominent features in cities around the world.
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Introduction Have you been in a power outage that lasted more than a few minutes? What did you do?
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Introduction While power comes from different sources like coal, hydro, nuclear, wind, and Solar one of the most important sources is oil. Roughly 40% of U.S. energy comes from petroleum
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Introduction Oil used in 4 key areas Transportation: powers cars, trucks and planes Electricity generation Heat Raw material in important industries like plastics Because of the importance of this fossil fuel, changes in world price of oil can and have lead to economic recessions and expansions. Oil prices fluctuate, often dramatically.
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Introduction How do we understand the impact of market, political, and natural events on the price and quantity of oil? Two of the most important concepts in economics, supply and demand, provide us with an understanding. Supply shows how much businesses and governments are willing to provide of a particular product or service at every price. Demand show how much consumers want to purchase at those same prices.
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Quick Digression: Barrel of Oil The standard measure of oil is a barrel. Today the word barrel seems strange in an era of massive pipelines and double hulled supertankers. However, when oil was first discovered in Western Pennsylvania in the mid 1800s the early drillers needed someway to store and transport their precious liquid. Early oil drillers used wooden barrels to hold the oil. Barrels were easy to get and thousands of companies made them. How big is a barrel of oil? A barrel holds 42 U.S. gallons or 159 liters Or average amount of water people use to take a bath.
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World Petroleum Usage in Millions of Barrels Per Day
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World Petroleum Usage What does the figure show? In 1960 world used 20+ million barrels of oil a day In 2007 world used 86 million barrels of oil a day. Petroleum usage is climbing each year by about 1.2 million barrels per day. If Olympic size swimming pools were filled with oil instead of water, the world is currently draining over 5,000 pools per day.
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