Macroeconomics video paper---just got my grade back on this paper I turned in....scored 100................The Ripple Effects of Oil and Other Consumable Goods within Supply and Demand Henry L. Davis Jr. Piedmont Technical College The Ripple Effects of Oil and Other Consumable Goods within Supply and Demand The rise and falls of commodity goods or services within an economic environment have been shown to create rushes to retailers, a civil unrest, or can set the stage for civilian protests. Quite similar to being that of a catalyst, they have even been known for fueling the beginnings of regional conflicts and revolutions. When you think of these factors and add them together you can quickly realize the importance of supply and demand within life in general, and you can easily see how a particular product can make changes within a society during that particular product’s price increase or decrease. All consumer goods, some more than others are closely related. They are in fact tied together and connected within a way that each are always making an impact on the economy and on the wallet of consumers. There are numerous ripple effects of their relationship to each other that will be or can be handed down to the consumer. A firm that sells a product or provides a service always has the option of on whether or not to pass on their rising production costs to the expenses or costs of the consumers. The real issue here is whether or not the consumers will opt to pay more for a good or service when the price of the good or the service increases. A secondary issue on this matter is if the consumer chooses not to purchase a particular service or good after an increase of cost has been passed, then why or why not. The answers to this and other matters of economics are easily understood and gained by combining one’s understandings of the balances and the realities of economics as related to the understanding of supply and demand. Supply and demand is an absolute crucial element that profiles the understanding of the following which is an economical fact. Supply and demand dictates not only what price is offered on a particular good or service but also it will determine how much of the products or goods should be provided and located within the market. On top of this is this fact. The reality of economics covers that most consumers are consistently rational in what they will do in nearly all cases of retail purchasing. Most if not all consumers will use and/or find a truly knowledgeable source to make their decisions and they will consider the when, why, or if they are willing, to continue purchasing a good or service. (CyphSB, eHow Contributor) Demand is the markets appetite for a certain product. When the product is in demand more this raises the quantity of the supply. If more supply is not available this will generally raise the price of the limited supply that is left. In the event of firms increasing the price of a high dollar item, consumers are less likely to purchase these goods and firms lose even though the units sold may bring in more revenue per unit to the firms. This would be considered as being an inelastic product situation. In the event of companies or firms raising their prices on their product without much of a change in consumer demand for them, this would be a situation of elasticity that would fall essentially to the firm’s advantage. These products would be either within substitutes or within the essential needs of what the consumer needs anyway, regardless of a price hike. Some of the commodities which often have rising prices are cotton, wheat, corn syrup, copper, beef, pork, and coffee products. As an only option to stay on the right side of the economic fence in these matters many firms that are caught in a situational economic dive, will eventually pass their incurred price increases along to the product’s consumers. American firms or firms known that are currently doing business in America on this note are firms like Procter and Gambrel, Kraft foods, Ralph Lauren, Polo, and Haines, just to highlight a few. Being that unemployment is higher now than the perfect rate of six percent, this type of a situation is sure to see how goods can be continuously sold but will surely affect the pocketbooks of each and every buying consumer along the way. Without a doubt whether a firm passes on a cost or not depends on the class and the individuality of the product. The good news of this is that any increase in the price of a good and service is usually only administered in incremental measures. In a recession, the price of food is usually the most righteous indicator of when goods will rise and how much. Here in this example of a recessive scenario, a lower income consumer will generally notice the change right away while a more influent consumer may not even notice it at all. Market analysts note that the amount of liquid assets that the Feds have pushed into the economy has to be spent and the amount of debt that the Fed has incurred by making saving pay outs has provided cash to companies which will eventually trickle into the firms funds to invest. This makes and helps companies to invest which in turn pushes up the commodity prices again to the consumers. Many would like to blame Wall Street or others for inflation but we can’t blame the complete picture of inflation of all this to Wall Street or to the other players within the financial sector like JP Morgan or Goldman-Sachs. When it comes to the future speculation of higher prices on items such as wheat, beans, corn, tomatoes or other agricultural type products there are surely other factors. Natural disasters such as droughts, fires, tsunami’s, tornados, floods, hurricanes, and the likes are real factors of price increase and decrease and are dominant natural forces of nature that almost always has the most effect on any consumer’s spending cost. This can be true in the wake of local disasters or it can be a result from individual atrocities in various ways which surrounds and involves the entire world. Simply said, unpredictable catastrophic events can lessen the accuracy of any price prediction whether it is within a surge or a decline. It should be noted that when inflation falls or rises consumers will and should be concerned if inflation will kick in soon, however the notion that Wall Street and other financial institutions are gaming the system by using false predictions or using other unwarranted increases for profits are have not yet to be determined. This being noted, paying attention to what the Feds do to keep inflation at a minimal is important for consumers to do because the bottom line is that whatever the Feds decide to do on any type of matter concerning economics, it will definitely have an impact upon consumers and the value of their buying dollar. To further this exchange of information let’s look a minute at the cost of oil and the cost of transportation for any product that is delivered for resale. We know that oil prices fluctuate for various reasons such as the weather and natural disasters, acts of terrorism, or maybe just the use of faulty or broken equipment. When we know and understand this as a fact we can also see clearly the connection that transportation of all goods depends on the mechanics of goods being able to be delivered for consumption and resale at a reasonable price. Most of the time when the price of oil goes up, the ripple effect of factual connectivity allows for the rise in the cost of transportation of the acquired product whether the product is a final product or is an intermediate product. A fact also in this is that there are numerous other ways that an increase in oil can easily attribute to a trickle-down effect of cost to the consumer. Many products that are sold to consumers and firms also bear the huge footprint of oil within the versatility of what oil can be used for. Looking at the many products of which that use oil as a component we can see that there are many more products than just gasoline or diesel that uses oil as by products. Some of these are drinking cups, hair curlers, bandages, cameras, electricians tape, tool racks, car battery cases, epoxy, paint, mops, slacks, insect repellent, oil filters, umbrellas, yarn, fertilizers, hair coloring, roofing supplies, toilet seats, fishing rods, lipsticks, and the list goes on and on. It’s quite simple to see how oil is connected to various consumer goods by these transportation issues yet by looking at this partial list of products that incorporate oil within the genetic makeup of their product, the understanding of the ripple effects of increased oil prices to the base of all consumers is even greater. As for the wonder of why many economists often limit their inquiries to just to one market, we must always consider in economic reasoning that every choice of buying and selling has its costs and benefits with all decisions ultimately made by the comparing of them. Knowing that economics is the study of how human beings coordinate their wants and desires by given decision-making mechanisms, social customs, and political realities of the society, we should take in account that in order to understand all these desires and wants and relating to them in each and every market together would be in itself a fruitless wonder world of complex scarcities that would be almost impossible for one to attain or understand. To think about issues of economic complexity like an economist, it would involve addressing almost all and any issues using a cost/ benefit approach first. Only then is when an economist can best relate, within economic reasoning, the factors involved in the process by abstracting from the “unimportant” benefit elements of an issue while focusing more on the “important” ones. By creating a simple model that captures the essence of the issue or problem and addressing all within this manner, and by testing a singular economic model an economist can more accurately match the predictions of the model to use the best first hand empirical evidence that will or does support his understandings of the given issue.
Posted on: Wed, 27 Nov 2013 15:48:02 +0000
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