Severus (polystyrenehart) wrote in poli_issues,

supply and demand

Gas prices are suppose to follow supply and demand. but is this so? 

I say no.  The reason I say so is because if it were, the prices would not be based on "futures"  or what equates to a stock market type fluctuation.  Also, if gas prices were set truly based on supply and demand, gas prices would rise higher and more violently and would only stop when people started slowing down their buying of the product.  Interesting thing is is that's not the case.  Rising prices in gas has historically NOT changed American's buying habits with the obvious exception of the gas shortage of several decades ago.  If pearls or diamonds or gold prices were decided in similar ways then we would probably not be paying as much as we are for them.  These "rare" products are so expensive because of supply and demand.  They are "rare" and people want them, so the price goes continually up until it levels off where people buy less and the supply is not depleted too quickly at what economists call an equilibrium. 

"The law of supply and demand predicts that the price level will move toward the point that equalizes quantities supplied and demanded."
"The equilibrium point must be the point at which quantity supplied and quantity demanded are in balance, which is where the supply and demand curves cross."

Both quotes come from the NetMBA-Business Knowledge Center. 

Point is, gas prices have NOTHING to do with supply and demand and is based solely on the whims of the corporations in what they thinks we will pay and NOT change out spending habits and the strange stock market version of the oil "futures".  Tisk Tisk!
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