Article Analysis Paper

1275 WordsOct 13, 20086 Pages
Article Analysis Paper The United States consumes more than 25% of the world’s petroleum products which is a large percentage, considering only 3% of the world’s oil reserves are produced by the United States. Given the demand for petroleum products such as gasoline, understanding why Crude oil prices have skyrocketed in recent years, is not hard. According to the article “Ending America’s Oil Addiction,” the surge in crude oil prices can be reduced in large part to the simple concepts of supply and demand. (Cooper, 2008) This paper will define terms such as economics, micro economics, the law of supply, the law of demand and the factors which lead to a change in supply and demand. This paper will also summarize the article and…show more content…
90) Since 2004 the demand for gasoline has been constant and the price of gasoline has continued to rise, causing gasoline expenditures to rise astronomically. However, given that an acceptable substitute for gasoline does not exist, consumers are unable to cutback on the amount of gasoline being consumed. The article suggests that some reasons for consumers’ inability or unwillingness to cutback on the consumption of gasoline are long commutes, the use of vehicles which are not fuel efficient and a lack of alternative solutions such as carpooling and public transit options. The law of supply also suggests that if a firm cuts back on the amount of a good being supplied, the cost of cutting back outweighs the cost of continuing the supply. The Law of Demand The examination of the correlation between the price of a good and the law of demand is necessary to predict how market forces react to a reduced supply of goods. Dictionary.com defines price as “the sum or amount of money or its equivalent for which anything is bought, sold, or offered for sale.” (para. 2) Price is an essential ingredient of the law of demand. The law of demand is “quantity demanded decreases as price increases, all other things being constant” (Colander, 2004, p. 188) The substitution of alternate goods accounts for the law of demand. As the price of goods such as gasoline increases, people tend to replace it with similar goods which may have a lower price. If a good has
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