Naked Economics Chapter 3 Essay

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Chapter 3, Exercise 1: The assumptions are based on the determinants of supply due to the demand of gasoline being indefinite until a substitute or another factor changes the product and/or market. While researching the metropolitan area of Houston, Texas and the fluctuations in gasoline prices; the findings were a surprisingly slow, steady, constant downward slope for the last month. The factors believed to contribute to the findings were: cost of resources, number of sellers and expectations. When thinking of the rising prices of gas, people simply associate it with the famous crude oil per barrel prices exposed in the media. The price for the barrels averaged at a high of $105 in the first week of May and the price of a gallon in Houston was at a decreasing $3.74 from $3.89 about three weeks ago. The test of economics relating to the cost of resources versus the product isn’t sufficient because even at the highest peak in a month for crude oil, prices were still falling per gallon which leads to the other factor, the number of sellers/ suppliers. Every under construction site lately has been the input of a new gas station. This supports the slow falling price as the market widens with new competition. In the Cypress/Katy area there have been over ten new stations…show more content…
Again in the media there are concerns about finding oil and the cost of getting it to the United States, so when the oil companies start setting up new stations it can guarantee some security in the future. Also economists might see the built as a positive shift in the economy. Oil companies foresee the area flourishing and they are coming to settle before the people get there. The factor of expectations could be hard to read because every decision made from a forecast is a risk that may change the market as a whole in the

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