BP Oil Spills Essay Example | Topics and Well Written Essays - 1000 words

BP Oil Spills - Essay ExampleThe essay is thus a pure amalgamation of economies in the theoretical and empirical perspectives. It is highly rational to study the microeconomic impact of the rock crude crisis as the wastage of oil thorough a spill would surely decrease its supply in the world market. A egest in the supply of oil would cause its scarcity in the market and thereby increase its monetary values. A rise in price of oil would directly increase the cost of transportation and hence all the goods and services produced in the economy. The researcher in the context of the essay would be explaining the microeconomic impact of the oil spill in the economy of United States and the rest of the world. Analysis The three microeconomic analyses that can be figured in the context of the essay are Theory of release The theory of supply states that a raise in the selling price of goods and services in the market increases the supply of it, given all the other factors affecting suppl y remains constant. Figure 1 tot slue Price Supply Curve Quantitative Supplied (Authors Creation) The preceding(prenominal) graph explains a positively sloping supply curve in the market. A shift in the supply curve only occurs when the factors apart from prices changes in the market. An increase in the supply explains an upward shift in the supply curve. ... Figure 2 Shift in Supply Curve Final Supply Curve Price P 2 Initial Supply Curve P1 Quantity Supplied (Source Authors Creation) The figure 2 above explains the upward shift in supply curve of crude in the market. As shown in the above graph the sudden supply shock of oil in the market of oil color in U.S. would surely cause an upward shift in the supply curve. As stated in the above figure the upward shift in the supply curve would be forcing the supplies supply a lower sum at a higher price. Thus, given the market contain for petroleum the decreased in supply have indeed increased the price of oil in the market for U.S. from say P1 to P2 (McEachern, 2012). Theory of Demand The low of demand in economics states that the rise in price for a commodity or a service is inversely related to its quantity demanded, assume that all other factors affecting demand are constant (Ceteris Paribus). When a consumer creates a demand in the market, it is a want that is backed by proper purchasing power. The want has the power to satisfy the public utility of the consumers. Figure 3 Demand Curve Price Quantity Demanded (Source Authors Creation) The figure 3 stated above is of a negatively sloping demand curve. However the degree of responsiveness of the rate of change of quantity demanded with respect to the rate of change of price, depends on the stretchableity of demand for a product. It is true the demand price elasticity for petroleum in the market is moderately elastic in nature as petroleum is not a necessity. When, the prices of basic necessities of increases then consumers are forced to pay higher (Ross, 1979). Figure 4 Moderately Elastic Demand Curve (Source Nechyba, 2011) The above figure 4 is of a moderately elastic demand curve, where