Spiking+in+Oil+Prices+Changes+Motorists'+Behaviours+by+Kay

//**REMEMBER: DO NOT SUMMARIZE THE ARTICLE!!!**//

=TITLE OF EXTRACT:= Spiking Fuel Prices Force Changes in Motorists Routines

=SOURCE:= Cedar Valley Business Monthly Online http://wcfcourier.com/business/local/spiking-fuel-prices-force-changes-in-motorists-routines/article_66681056-6479-11e1-bbc7-001871e3ce6c.html =DATE EXTRACT WAS WRITTEN:= 4th March 2012

=DATE CURRENT EVENT WAS WRITTEN:= 6th March 2012

=EXPLANATION OF THE ECONOMIC THEORY RELATED TO THE ARTICLE:= Gasoline is refined petroleum which is used as fue for internal combustion engines. Recently, gasoline prices have been climbing in places such as the US and Canada. The main idea of this article is that as gas prices start to increase, the consumers will start to find ways to cut down on buying gas. The economic theory is related to supply and demand. Supply and demand is the economic theory that concludes that a unit price for a good will vary until it settles at equilibrium, the price is equivalent to the demand of the product. Because the country is having trouble getting gas, the supply for gas is low, which causes a price increase and therefore causes changes in consumer demand of the product.

=VOCABULARY TERMS AND DEFINITIONS:=
 * Supply and Demand: The economic model of price determination in a market.
 * Supply: The amount of a good or service offered for sale.
 * Demand: The desire of purchasers and consumers for a particular commodity, service or item.
 * Unit Price: The identification of and labeling of items on sale with retail pricing per units.

=DIAGRAMS:=



From the two diagrams above we can see that there are two possible scenarios-- the first diagram shows the Demand curve decreasing from Q1-Q2, which shows that with the spike in gasoline prices, motorists may find other ways for transportation, such as carpooling or using public transport, in order to avoid paying the high gas prices. Because the decrease for demand will decrease, the companies will lose profit, which may cause them to decrease gas prices again in order to win back some of their customers and earn more revenue. =EVALUATION= The article states a few possible ways to counter the raising gas prices. For example, one woman stated that she would start carpooling with other families in order to save money on gas. Another one suggested that they would stop driving to visit relatives or families as much, and possibly plan her routes so that they would take her the shortest amount of time and with through the areas with the least prices for gas. Although this is a good idea, it does not benefit the consumers because that means there is an added strain to the consumers as they have to plan out their route and wastes their holiday times. The best way for consumers to get out of paying for this might be to cut down on travelling on long trips and possibly to carpool more or use public transportation. In places where that might not be readily available, walking or biking might be an option.

Another way to ensure that gas prices don't get too high could be through government subsidies of the product. Since gasoline is used so much in our world, the government would actually be helping the society through subsidies because that would ensure the people don't have to go through so much trouble in order to make cross border trips. However, subsidies means an opportunity cost, because that money could be going to something else such as education or social programs. In addition, there is a cost on the world, because by paying for gasoline we are encouraging people to be environmentally unfriendly, but carbon emissions are not something that we should be encouraging.

If the environment is a concern, another solution could be to use this opportunity to impose certain taxes on the gasoline companies to ensure that some of the money that they earn is given to the environment so they could probably use that money to fund other environmental programs that would help offset the damage that crude oil is giving to the world.

Even though this increase in gas prices might seem like a benefit to the companies in the long run, it is actually harmful for those countries because they cannot keep their customers and will have to end up lowering the price to accomodate the loss of demand anyway. For the gasoline companies, they will probably lose out more in the long run if they keep their prices so high or keep spiking prices because people will find ways to avoid paying for the gas.