This article is about the shortage of supply (oil) which raises the oil prices in the market. Through this, we can clearly see that this article divides into two parts, the decrease in oil supply and the demand for the oil.
The International Energy Agency had sensed the future shortage for heating oil so they set a record price of $100 a barrel in to order decrease the demand because ÃÂÃÂ ÃÂ .record prices would erode fuel use.ÃÂ Supply is the relation between the price of a good or service and the quantity that firms are willing to sell (1). Demand is the willingness and ability to purchase a commodity or service (2). There are a few factors that may affect the demand to change for a good or service: expectations of a future price change, the income of the consumer, the number of the consumer etc. "Higher prices are starting to hit the market" which indicates that the prices for oil are rising.
The illustration that accompanied Marshall's origi...
Perfectly inelastic demand
Perfectly elastic demandIn this case, we know that the increase of the price had caused the demand for oil to decrease exceedingly. We can graph out the demand and supply curve from the information given in the article. The initial price of the oil was at P1 and the quantity demanded was at Q1. However, because of government intervention, the price of the oil in the market increases from P1 to $100. This causes the quantity demand to decrease and the demand curve to shift to the left from D1 to D2 while the supply curve stays the same. There are also government interventions on the oil supply ,ÃÂdemand for heating oilÃÂ . has dropped by about half since new U.S. government rules took effect this year that prohibit ÃÂ ..nonhighway vehicles from using the high-sulfur fuel.
Elasticity is the ratio of...