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Project 1 - Michele Baker Business Economics GM 545 Summer...

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Michele Baker Business Economics GM 545 Summer A 2009 Project 1 Email: [email protected] 1
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Gasoline Prices Supply and demand have played a large part in the increase of gasoline prices the nation has experienced lately. The Law of Demand clearly indicates that the rise in demand for gasoline will lead to an increase in prices. This has been a topic that seems to continue coming up in conversations both in the classroom as well as everyday interaction as it seems to be affecting everyone. Some cannot afford to put gas in their SUV’s anymore because the prices have been fluctuating and continuously increasing over the last couple of years. Even though I have read several research studies and articles on this before, I found a very interesting point that I had not previously heard of or thought about. I have often wondered what we as Americans can do to reduce demand of gasoline, since the increase in demand has obviously led to the rise in petroleum prices. However, this study shows that the problems may be stemming from the increase usage in both China and India to power their cars and factories. Unfortunately, there is nothing we can do to reduce the demand that other countries are creating. The article suggests that really the only thing that Americans can do is to decrease their personal demand for the fuel by getting rid of the gas guzzling SUV’s or turning to alternative sources of transportation. Here in Arizona one of the skeptics of the gasoline price hike was Attorney General Terry Goddard. He personally looked into the price spike here in Arizona since we do not utilize the Gulf Coast as a source of our fuel. Instead we get it from California. He found that there were no laws violated. However, since the recent gas price problems, the City of Phoenix has built a light rail to help with the increase demand for public transportation. Apparently having supply and demand dictate the prices of gasoline is better than the alternative (Krantz, 2006). If prices were too low, supply would be scarce. So if the government imposed a price cap, there may not be enough gasoline to meet the demand and therefore equilibrium could not be achieved. On the other hand, both an increase in demand and a disruption in supply can lead to higher prices.
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