• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Economics Commentary Demand and Supply

Extracts from this document...


OPEC: no control over prices? Price Elasticity of Supply is a measure of the responsiveness of the quantity supplied of product (A) to a change in price of product (A) alone. Surplus is a situation in which the quantity supplied exceeds the quantity demanded for a good or service; the price of a good is above equilibrium price. Another term to note is demand: the amount of a particular economic good or service that a consumer or group of consumers will want to purchase at a given price. Typically, quantity demanded decreases with increases in price. Lastly, supply is the total amount of a good or service available for purchase. Typically, quantity supplied increases with increases in price, in this article. In this article, OPEC had decided to reduce oil production to hopefully increase the rapid decline in oil prices, however their plan did not work and oil prices continued to plummet. ...read more.


Crude prices however continued to drop by 5% as financial markets fell across the globe. This decrease in demand and price drops also caused an oil surplus, as OPEC was overproducing 300,000 barrels a day above its own quota of about 29 million barrels. The reason OPEC decided to drop these production rates can be explained through Figure1. As one can see, in this graph, as the supply of oil decreases from S1 (oil) to S2 (oil), the prices tend to increase from P1 to P2. Price/Unit S2 (oil) S1 (oil) P2 P1 D (oil) Q2 Q1 Qsold Although it can be seen that in the short term, the production cut backs have not achieved much of the desired goal, in the long run, as the economy begins to reconstruct itself, oil prices will steadily rise due to these production cuts. ...read more.


This drop in oil prices affects motorists; with the drop in prices, consumers can buy gas for a less amount of money. Also, low income earners can switch from using inferior goods to normal goods from saving money originally used for gas. Low oil prices can negatively affect stock markets. Falling oil prices are a barometer of weakening demand and a softening global economy. Which is bad news for earnings -- and the energy-heavy S&P 500 index that includes, Chevron and Apache to name a few. Firms that can't raise prices will find profit margins squeezed - and will have to cut back on production and jobs. Even if some producers of energy-intensive products can raise prices enough to cover higher energy costs, they'll nonetheless sell fewer of their products because of those higher prices. So they too will have to cut back on production and jobs. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays


    Fearing collapse of oil revenues, Saudi Arabia negotiated with other major OPEC and non-OPEC members to cut production sharply and since then, compliance with output quotas has been considerably good. 2) Since 1999, the world demand for oil has increased consistently.

  2. Economics Notes. Elasticity of Demand and Supply.

    - Necessity & tates vary from consumer to consumer. Example: * Time period: - In the short term, demand is more inelastic since it is hard for consumers to change their buying habits in a short time. - In the long term therefore, demand becomes elastic.

  1. Economics Commentary - demand for lactose free milk.

    the ordinary milk do, another kind of milk especially for the consumption for people who suffers osteoporosis had been released in the market. In countries where the majority of the population had an age average of nearly 50 - 70 years for example European countries such as France, Poland, Switzerland,

  2. Economics Essay on Supply and Demand and the operation of markets.

    Therefore, the small local toyshop would not have wasted revenue by providing these dolls to the public as well as when lowering the price they will hopefully create profit. A shift along the demand curve The second change is known as a shift along the demand curve; an example of

  1. Macroeconomics Commentary - Japan's consumer prices fall on weak domestic demand

    An exchange rate is value of one currency expressed in terms of another currency. One of the disadvantages of a high exchange rate is damage to export industries.

  2. Discuss how demand side policies and supply side policies may be used to increase ...

    have been conducted and no agreement is settled, employees may strike, leaving the company with totally no output. Reduction of trade union power ? if the trade unions are not allowed the amount of power that they have today, they cannot increase the wages of their employees to a level greater than if there were no trade unions.

  1. 15 Historical Economic Questions on Mercatilism and the Development of European Countries.

    Having established the Federal Reserve between the stock market crashes of 1907 and 1929, there may have been a bit much on their plates in terms of costs. Upon the stock market crash in 1929, the Federal Reserve took the opposite course of which would be considered mainstream in today?s economy.

  2. IB economics commentary - Demand and Supply

    The reason behind the increase is a rise in international prices of items such as wheat and sugar, while prices of other items such as meat and poultry rose due to a clear gap between local production and consumption. Meanwhile, consumers have over recent weeks been hit with an unprecedented

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work