Influences On Supply And Demand

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Economics is defined as the social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity and the incentives that influence and reconcile those choices. Scarcity and incentives are essentially the wants and needs of consumers to purchase certain goods or services and the availability of those goods and services at a given time. Companies spend years studying the markets so that they can accurately price their products to earn the maximum profit based on the supply and demand for that good or service. Increased price of a product decreases the quantity demanded while decreased price for that same product increases the demand. Oil for example can vary in price from week to week because of certain situations that limit the supply. In James Herron’s article in the Wall Street Journal, “IEA Again Cuts Oil-Demand View,” he outlines several examples of situations that increase and decrease the supply and demand for oil such as natural disasters, population growth, and economic downturns. Natural disasters can severely affect a country’s supply and demand for certain products. For example, Japan was one of the most advanced countries in the world in nuclear energy; however when the huge earthquake happened it caused a nuclear meltdown in one of their major power plants releasing very dangerous toxins into the air. “Japan's oil demand rose 9.5% in December from the year-ago month, as it uses fossil fuels to fill the gap left by shutdowns in its nuclear industry after the earthquake and tsunami last year” (WSJ). This loss of supply of nuclear power is the reason their demand for oil increased so dramatically in just a year’s time. Another factor that plays a huge role in determining the supply and demand for a product is rapid population growth. The more people that are in a country requires that

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