Thursday, March 7, 2013

Topic 4: Ripple Effects and Elasticity


The up and down changes in the prices of oil will drastically affect the entire economy along with one's family as the oil's importance in the production of every good and service that is produced, a change in this will affect everyone in society. Such an impact on society would cause a lot of other products and services to decrease in use.

If the prices of oil were to drop relatively low, then the use of products and services that utilize oil would tremendously rise in numbers. However if the prices of oil were to skyrocket, such products and services that operates on oil would decrease extremely fast.

Cars, the vehicles that transports us everywhere we go, ranging from getting to school and driving around for vacation. In the case of the prices of oil rising, less and less would drive in cars and resort to bicycling or taking the bus. Thus, the demand for automobiles will significantly drop and hurting the producers of cars, a big part of the current economy.

Conversely, the prices of oil were to drop, oil would be purchased more than ever and cars used more often as well.

Another example would include factories. All factories operate on oil and energy to produce the everyday products we use. If the prices of oil were to frequently fluctuate, producers’ willingness would change and either produces less when the quantity demand is higher resulting in a shortage or produce more then the quantity demanded, resulting in a surplus.



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