Events that cause shortages or additionales atomic number 18 numerous, moreover can be categorized in two liaisons – those that repair supply and those that affect demand. In the case of the SUVs, it is some promising that events are causing both a decrease in demand and an increase in supply. SUV owners are trading in those gas guzzlers for fuel efficient, small gondolas. There shows the increase in supply. Also, consumers who are looking for a good used car are mindful of the long term cost of direct a SUV, and are also choosing small cars. There goes the demand. The surplus in the market is evident by the decrease in SUV footings. The number one reason for the sales slump in SUVs is soaring gas prices. “If gas prices stay where they are at or continue to rise, the body-on frame SUV is an endangered species.” (CNN). Gas pricesare controlled by the interplay between supply and demand; the collusion theory tens to leave out the demand side of the market. The demand for gasoline is aid to be price inelastic, meaning that when prices change, consumers’ buying habits change proportionately little than the accompanying change in price.
The price is inelastic for some(prenominal) reasons: gasoline is broadly defined and has very few near substitutes; gasoline is viewed as a necessity by most people; consumers do not have as oft time to alter their buying behavior in chemical reaction to price spikes. That is in the short run. However, in the long run, consumers chastise by seeking alternatives and the demand for gasoline becomesmore price elastic. As the price of gasoline rises and becomes a larger percentage of the typical household bud drum, consumers may become more sensitive to price changes, making demand for gasoline more elastic. Pump prices are bound to rise even further if oil sustains its advance. oil continues to hit record high prices. There are many an(prenominal) things that contribute to the rising prices of oil but the main thing is a weakening of the dollar by stronger...If you want to get a full essay, order it on our website: Orderessay
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