Written Assignment #1 – Assessment of Lower Fuel Prices Spring 2015

Since June, the price of a barrel of crude oil has tumbled more than 50 percent. A gallon of regular unleaded gasoline now costs less than $2 in many states. Last week, crude prices fell below $50 a barrel.” (Automotive News, 1/12/2015)

 

First: prepare an assessment of why gas prices are relatively low, and still falling.  Your assessment will include a graph of the gasoline market.  Your graph should include at least 4 determinants that have caused a change in the equilibrium price and quantity of gasoline.  Be sure to label each new equilibrium caused by the addition of another variable into your graph.

Second: conclude your assessment by discussing whether or not falling gasoline prices are good for the economy.  If falling gasoline prices are harmful to the economy, should the government impose a price floor?   Be sure to use economic theory in your analysis, and address the four economic criteria of the efficiency, fairness, price stability and potential for economic growth associated with a price floor.  Include a works cited.

 

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