Gm- Why Do Gasoline Prices Fluctuate?

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Stacey LaFave Business Economics GM545 Summer B 2008 1. Everyone’s gasoline problems. ---Why do gasoline prices fluctuate? The reason gas prices fluctuate have to do with supply, demand and competition. The Federal Trade commission did a study on why gas prices fluctuate in 2005. In their reports it brought out that some observers suggested that oil company collusion, anticompetitive mergers, or other anticompetitive conduct was the primary cause of higher gasoline and not market forces. For this reason, the Federal Trade Commission (FTC) investigated these claims and revealed that it was the market factors that were the primary drivers of the gas price increases and spikes. According to the study of a particular gas spike in phoenix conducted by FTC there were basic lessons about how gas prices increase or spike. First, when demand is greater than supply the gas prices rise; if it costs more to produce and supply it or if people buy more of it at the current price. On the other hand, when supply becomes greater than demand the gas prices fall; if it costs less to produce and supply or people buy less gas at the current price. When the price where the quantity consumers demand matches the quantity that producers supply the prices will stop rising or falling and become steady. Second, how high or low the price of gas is will be determined by how the consumers and producers respond to these price changes. The most important factor in the price of gasoline in the U.S. is the worldwide supply, demand and competition for crude oil. In the last two decades the demand for crude oil has grown significantly and has proven to be the main reasons for our gas prices rising. Ch.2 Web- Based Question 1. When going to the web page and selecting the subcategory
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