Assignement 1 - Course Project Part 1 Business Economics...

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Course Project Part 1 Business Economics Ryan D. Lee 9/12/2010
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I will be discussing Everyone’s Gasoline Problem. I am glad to be answering the question of fluctuating gas prices because I have always wondered why prices are always changing, and seem to be steadily creeping upward. First off, gasoline, like any other commodity is controlled by the market and but what makes this product so unique is the constantly increasing demand both locally and around the globe. Since the invention of the car faster and more reliable transportation has been at the forefront of the American economy. Today cars, airplanes, recreational vehicles and many other forms of transportation exist that all require gasoline to operate. According to one source there are over 10 billion gasoline using vehicles in operation in the United States today, (Fun Advice, 2010). Furthermore, it is estimated that Americans drive nearly 3 trillion miles per year and consume about 178 million gallons of gas per day, (Kevin Bonsor). Graphically speaking demand for gasoline is going to be constantly shifting to the right as demand increases. In order to keep prices somewhat under control, supply will need to keep pace with the demand. Ideally the supply will be constantly shifting to the right to keep up with demand. Anytime, demand for gasoline spikes, like on big traveling holidays, the consumers should expect to see a steeper incline in prices. Other factors that influence gasoline are the detriments of demand discussed in the text. One of the detriments of demand is “expectations regarding future prices, income, and product availability,” (Stone, 2008). Natural disasters, daily futures trading and global politics all detriments of demand and play huge roles in gasoline price variance. “Price increases generally occur when the world crude-oil market tightens and lowers inventories,” (Kevin Bonsor). According to Tom Kloza gas prices vary so much from state to state and county to county because of mandatory tax that his attached to all gasoline sales, (TV, 2010). He further states that the profit margins for retail sells of gasoline are very low. The individual business model that the gas station operates by is the main reason why consumers will see different gasoline prices between stores that are right next door to each other. Since retail sales of gasoline are so small, and occasionally offered at a loss, many traditional gas stations have moved to a more C-
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