Principles of Economics Essay

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Principles of Economics By: Christina Ann Ward Strayer University Dr. Vargha Azad 07/28/2013 Introduction Oil: When the supply shocks are demanded shocks and the demand shocks are supply shocks. This is an important article in my opinion that is run through a newspaper called “the economist” because it helps people that don’t know a lot about the economy or why gas prices tend to rise as high and often as they do, better understand the background and reasons why. It is articles like this that helps people be able to accept that our market is constantly growing and that price increases like this are sort of a necessary action. Supply and demand is a constant thing, they are the twin driving force of our economy that work together to create a fully functioning economy. So, without one we can’t have the other. There are many components to supply and demand, two that are important to this particular article are supply shock and demand shock. Supply shock is defined as an event that suddenly changes the price of a commodity. Demand shock follows with being a sudden event that increases or decreases demand for goods or services temporarily. In this particular case in hand, there is always at least one of these two if not both that greatly affects the amount of petroleum that is not only supplied, but also demanded. In this article it points out many important key factors, and each one of them can really get you thinking about the entire petroleum industry. Reasons include: * There is always a reason behind the price of oils increase or decrease, whether it is due to a shortfall in oil production or even a rapid growth in global demand. * Rising oil prices represent both demand shocks and supply shocks to the American economy. * Soaring oil prices can also dent an economy’s productive capacity since without petroleum our factories and machines can’t

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