ECON 545 Project 1

2058 WordsApr 12, 20159 Pages
Edgar, my cousin, is always thinking of the next business idea. His next business idea includes buying to gas stations. He believes that both gas stations would be profitable and allow revenue for him to increase. After recently reading an article named “$4-a-Gallon Gas Fueling Fears for Recovery” I decide to research the market in terms of supply and demand, elasticity, costs of production, pricing, and normal or economic profit or loss. In order to help my cousin Edgar I would like to provide him with the most informed advice possible. Owing to the fact that the crude oil prices have increased over the years, attempting into this business appears profitable. According to an online blog, people are facing extraordinary high prices…show more content…
For instance, oil price increased at a higher rate in 2006 compared with 2005. Prices rose by 1.62 per cent in 2005 and 1.87 per cent in 2006. During this period, India's real growth rate in GDP also increased from 5.61 to 6.38 per cent. So did China's — from 9.18 to 9.76 per cent. But Russia's GDP growth rate decreased from 6.86 to 6.13 per cent, despite it being a major exporter of oil! This only goes to prove that oil prices are just one among many variables which can affect a significant metric such as GDP. Oil price increases are generally thought to increase inflation and reduce economic growth. In terms of inflation, oil prices directly affect the prices of goods made with petroleum products. As mentioned above, oil prices indirectly affect costs such as transportation, manufacturing, and heating. The increase in these costs can in turn affect the prices of a variety of goods and services, as producers may pass production costs on to consumers. The extent to which oil price increases lead to consumption price increases depends on how important oil is for the production of a given type of good or service. Oil price increases can also stifle the growth of the economy through their effect on the supply and

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