Chapter 2: The Operation of a Market

Falling gas prices up SUV sales

http://abclocal.go.com/wabc/story?section=resources/traffic&id=7038986#bodyText

|Summary|
As gas prices are falling, more Americans are going back to buy bigger vehicles which are not new fuel-efficient hybrid rather, gas-guzzling SUV and trucks. As stated in the article, with the price of gasoline dropping, dealers report sales of SUVS and trucks are up at least 9 percent, according to one national study. The Cash for Clinkers program aimed at spurring sales of fuel-efficient cars while getting older models off the road had recently ended. Motorists say there’ll always be a market for sport utility vehicles. Dealers say expect more so-called crossover vehicles, which could help soften the blow if gas prices start to go back up.

|Connection|
Under most circumstances, consumers will buy more of a product if the price is low and less of it if the price is high. If the price of a product increases, less of the product can be purchased with the current level of income. In this article, the falling gas prices can relate to the interaction of the law of demand and the factors that affect the quantity demanded. Clearly, this article talks about gas prices dropping which caused more American’s to going back to buying gas-guzzling SUVS and trucks. This is to my knowledge the factor price that is affecting the demand, SUVS and trucks where price decreases in gasoline increases the quantity demanded for bigger vehicles.

|Reflection|
The fact that dealers report sales of SUVS and trucks are up at least 9 percent is remarkable in my opinion. It is difficult to predict the long-term effects of high gas prices as an average consumer so deciding on buying a bigger gas-guzzling vehicle in parallel to the decrease of gasoline price is not a bad choice. The market changes as it often does. Buying a SUV or a truck is not necessary affected by gas prices but for big family purposes or participating in outdoor activities that includes hauling loads or pulling a boat. Furthermore, when the gas prices remained at a higher price there is no doubt that the sales of bigger vehicles were lower however with the prices falling in gasoline, it would be apparent that the demand for bigger vehicles would increase. As a result, the sales of SUVS and trucks would increase.

Chapter 1: Introductory Concepts

Gasoline prices keep rising in California while falling nationwide


http://www.latimes.com/business/la-fi-gas15-2009sep15,0,509103.story

|Summary|
This article recognizes that the average price of a gallon of regular gasoline is higher in California than elsewhere in US, which according to experts, is the result of low production and tight supplies in California. It stated that over the last week, pump prices rose through out California, the average cost of a gallon of regular in California went up 5.4 cents, which set a high for the year for the second week straight while nationally, the average price dropped 1.1 cents. Analysts said that some of the reasons for the unusually large difference in price could be the fact that refineries in the state are running short of full production. As for the week that ended sept.4, California refineries produced 5.8 million barrels of gasoline but during the same week last year, the refineries pumped out more than 6.2 million barrels even though oil supplies were nearly 40% lower.

|Connection|
Scarcity by definition is being insufficient for the demand. This article presents itself as an example that relates to the concept of scarcity because it talks about the shortage of production in gasoline resulting in price increase. With the fundamental knowledge of the supply and demand concept, gasoline is regarded as a scarce resource because there is a limited supply, therefore affecting the price rapidly. The demand for gas is even greater now a day because of the economic recession as prices for automobiles have gone down significantly, which means more consumers are buying cars. As a result, the reason for price increase is set off by the demand for gasoline, a scarce resource.

|Reflection|
The market reflects on the price determined by the interaction of consumers, the concept of supply and demand. So there is no doubt gas prices will remain high. Until then, there are temporary solutions such as having hybrid vehicles and electric cars. I believe it’s a temporary solution because the world population is growing exponentially and scarce resources are depleting. Moreover, the more industrialized the country is requires a greater vast of refineries to produce raw materials so USA is lacking to sustain all the states with resources on limited supply of scarce resources.

First day of Economics class. >=]