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1、Legal aspects of papersLegal aspects of papersThe Market of Gasoline PricesEcon 002Section 008Group 60Peter BumbargerWilliam GardnerAnand TarparaIntroductionThe United States is constantly in motion. There are countless members of the American workforce that travel to and from their place of employm
2、ent everyday that require a means of transportation. Almost all efficient forms of transportation require a type of locomotion called the internal combustion engine that which requires the fossil fuel gasoline. As it can be noticed, gasoline carries a very important role in the American economy, and
3、 without it, the economy would be slowed down significantly. Gasoline is arguably the most important resource of our era. It pumps like blood through the veins of our economy. It flows from other nations to our refineries, where it is processed. Then it is passed onto the consumer who uses it to mai
4、ntain a standard of living unrivaled in the span of human existence. If gasoline is the blood of civilization, one can argue that the fluctuating price of gasoline is its pulse. As economists, it is our job to monitor this pulse and see how it is affected, and to see what effects it has upon us. In
5、the past ten years the price of gasoline at the pump has over doubled. This has an incredible impact on Americans in ways that they may not suddenly realize.Recently, the price of gasoline per gallon has been skyrocketing, dropping, and then rising again. As for most cases in economics, this can be
6、explained by the laws of supply and demand. This can only explain the enigma only to a certain degree. There are external and internal factors that are also present.Analysis of Supply and DemandThe Law of Supply and DemandThe law of demand states, “When the price of a good goes up, people buy less o
7、f it, others things being equal. When the price of a good goes down, people buy more of it, other things being equal.” This is the case for all goods under ceteris paribus, meaning all other things equal. Because of this, the demand curve has a negative slope. The law of supply says, “At higher pric
8、es, a larger quantity will generally be supplied than at lower prices, all other things constant. At lower prices, a smaller quantity will generally be supplied than at higher prices, all other things held constant.” The supply curve has a positive slope because as price increases along the y-axis,
9、quantity increases along the x-axis.Where the demand curve intersects the supply curve is at a point called the equilibrium point. It is where supply equals demand. This is important because this is also known as the market clearing price. At the equilibrium, profits and consumption are maximized.If
10、 the number of gasoline stations in a local market expands significantly how will this impact the equilibrium? What will happen to the price of retail gasoline in this case?If there is an increase in the number of gas stations in a local market, then that market will have a greater supply of gasolin
11、e. The additional gas stations add to the overall supply for the area. This would cause the supply curve to shift to the right because there is more gasoline. If the supply curve shifts to the right then the equilibrium point will drop down.Since there are more gas stations in the area, then the con
12、sumer will have more choices of places to buy. Let us assume that a customer lives seven miles from gas station A. They dont mind making the journey to get gas because it is a necessary good, and it is the closest gas station for miles. However, if gas station B opens up two miles from the customers
13、 house, the customer will then choose to go to gas station B. Even if the price is exactly the same, they will choose gas station B because it is closer. The owner of gas station A notices his slump in sales and decides that in order to compensate for his loss of customers; he needs to drop his pric
14、e of gasoline. By dropping the price, the customer may think that it is worthwhile to go out there way in order to save money. However, now gas station A is taking customers from gas station B, C, D, E.etc. These other gas stations need to compensate for their loss of customers so they lower their p
15、rice also. When gas station B opened up, it upset the market equilibrium. The scales were shifted and supply grew. It was the markets job soon after to make up for it by lowering their prices. This causes a renewed equilibrium.If gasoline taxes are increased by 25 cents per gallon in Pennsylvania, h
16、ow will this impact the price of retail gasoline and the quantity sold? Will consumers or producers pay the majority of the tax increase? Refer to elasticity to strengthen your argument. If gasoline taxes were increase by 25 cents per gallon in Pennsylvania, then the price for gasoline for the consumers would raise 25 cents to cover the tax. If the producers understand the law of e
