GM545: Business Economics Fall Semester 2014
I reside in Rapid City, SD and fuel prices in my area have gone down. The current price at Exxon-Mobil for regular unleaded gasoline is $2.81. According to the U.S. Energy Information Administration, at this time last year, the price of regular unleaded gasoline was $4.01 a gallon. According to my local CBS News affiliate, KELOLAND, we have lawmakers to thank for the stable prices. “Reports that U.S. lawmakers are making progress on negotiations to bring an end to the government shutdown are keeping prices stable at the pump.”
Gas prices can and do fluctuate for many reasons. Some of those reasons include but are not limited to the following: the price of oil, supply and demand, taxes, and government regulations. The demand for fuel increases during the summer months, as well as during major holidays when people tend to travel the most. When people drive less or use other forms of transportation, this brings the demand down.
According to gaspricewatch.com, the average price in Rapid City for regular unleaded is $2.93, compared to the U.S. average of $3.30. While there’s really no rhyme or reason as to why South Dakota’s fuel prices are consistently lower than the national average, there are a few theories. Some of these theories include South Dakota’s low unemployment, and our locally owned stations. Having small mom and pop shops allow for lower prices because they can tailor their prices to the communities in which they do business.
Chapter 3, Question 14:
The two countries that consume the largest amounts of coffee are the U.S. and Europe. Currently, the demand for premium coffee is at equilibrium. Now though, consumers have experienced the pleasure of premium coffee. “A pleasure that is especially strong among the middle classes in China, Brazil, Indonesia and India” (Kollewe, 2011). And they want more of it, lots more! Therefore, now that consumers want more, the demand for such coffee increases.
Let’s have a look at Starbucks. They’ve decided to introduce a new premium blend coffee to the menu. The new addition causes an increase in demand. This also causes an increase in competition. Because of this, the supply is unable to keep up with demand. Therefore, a supply shortage occurs.
To compensate for the shortage, companies will raise their prices. This in turn, will cause most consumers to limit their consumption of Starbucks. Or they can do what I do, and quit cold turkey. Which let me just say, isn’t easy.
In this case, the supply curve will shift to the left. The price of one pound of coffee will increase to compensate for the increased demand. As a result, the new equilibrium will have a higher price and a lower quantity.
Chapter 8, Question 11:
I recently purchased a laptop on Amazon.com, saving me time and money. However, I’ve come to believe that this new era of ‘couch potato’ shopping as I like to call it, has made individuals lazy. No longer, does there seem to be face to face contact. We as a society