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 muse the microeconomic impact of the vegetable oil crisis as the wastage of oil thorough a spill would surely decrease its supply in the world market. A gloaming in the supply of oil would micturate its scarcity in the market and thereby increase its impairments. A rise in price of oil would promptly increase the cost of transportation and hence either 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 be Theory of Supply 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 affecti ng supply remains constant. Figure 1 Supply Curve value Supply Curve Quantitative Supplied (Authors Creation) The above 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 fossil oil in the market. As shown in the above graph the sudden supply shock of oil in the market of petroleum 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 quantity at a higher price. Thus, given the market demand for petroleum the decreased in supply sport 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, assuming that all other factors affecting demand atomic number 18 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 profit 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. as yet the degree of responsiveness of the rate of change of quantity demanded with respect to the rate of change of price, depends on the elasticizedity 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 ar forced to pay high er (Ross, 1979). Figure 4 Moderately Elastic Demand Curve (Source Nechyba, 2011) The above figure 4 is of a moderately elastic demand curve, where