Econ 545 Project One Essay Example
Leo Johnson
Business Economics Econ 545
May, 2013
Leojohnson24@gmail.com
Everyone’s Gasoline Problem
Ever since the first gas engine was invented by Nicholas Joseph Cugnot in 1769 there have been many challenges and issues when it comes to determining what the price of gas should be (Cugnot, N. 2013). As students study the laws of supply and demand in economics they come to realize how supply and demand play a major role in affecting the price of a gallon of gas.
The law simply stated when there is an increase in the price of gas the quantity demanded for gas will degrease and when the price of gas decreases the quantity demanded for gas will increase. We also know in the short run as the price of gas fluctuates quantity demand does not respond right away as it should, but this is because Americans dependency on gas makes gas relatively inelastic to price changes. If the price of gas continues to rise and remains high for an extended period of time people will start to look for suitable substitutes such as public transportation, electric cars and alternative fuel sources to name a few. When we look at gas price fluctuations and there effects in the State of Arizona we can understand why local government sometime feels the need to step in and tries to help reduce the burden on local residents. In August of 2005 the price of gas was $2.39 a gallon and in the follow month it jumped to $ 3.12 a gallon due to the gulf hurricane. Many Arizona residents were outraged because their gas was being shipped from California and not from the gulf (Krantz, 2006). One of the cities combat to the rising gas prices was the adoption of the light rail project which provides residents an alternative form of public transportation.
On a Macro level the Nixon administration tried to control inflation by imposing gas price controls in the 1970’s due to Arab oil embargo. This created huge shortages and long delays and rations at the gas pump. This event in history solidified
Business Economics Econ 545
May, 2013
Leojohnson24@gmail.com
Everyone’s Gasoline Problem
Ever since the first gas engine was invented by Nicholas Joseph Cugnot in 1769 there have been many challenges and issues when it comes to determining what the price of gas should be (Cugnot, N. 2013). As students study the laws of supply and demand in economics they come to realize how supply and demand play a major role in affecting the price of a gallon of gas.
The law simply stated when there is an increase in the price of gas the quantity demanded for gas will degrease and when the price of gas decreases the quantity demanded for gas will increase. We also know in the short run as the price of gas fluctuates quantity demand does not respond right away as it should, but this is because Americans dependency on gas makes gas relatively inelastic to price changes. If the price of gas continues to rise and remains high for an extended period of time people will start to look for suitable substitutes such as public transportation, electric cars and alternative fuel sources to name a few. When we look at gas price fluctuations and there effects in the State of Arizona we can understand why local government sometime feels the need to step in and tries to help reduce the burden on local residents. In August of 2005 the price of gas was $2.39 a gallon and in the follow month it jumped to $ 3.12 a gallon due to the gulf hurricane. Many Arizona residents were outraged because their gas was being shipped from California and not from the gulf (Krantz, 2006). One of the cities combat to the rising gas prices was the adoption of the light rail project which provides residents an alternative form of public transportation.
On a Macro level the Nixon administration tried to control inflation by imposing gas price controls in the 1970’s due to Arab oil embargo. This created huge shortages and long delays and rations at the gas pump. This event in history solidified