It is a fact that gasoline prices can become high enough that consumers will make substantial reductions in their gasoline purchases. Depending how much prices increase relates on how easily consumers can adopt to substitutes for gasoline . This would include taking public transportation. Studies have reported that consumers do not easily find substitutes for gasoline, and that prices must increase significantly to cause even a relatively small decrease in the quantity of gasoline consumers want. Gasoline is an inelastic demand , better explained by a “situation in which a price change leads to a less than proportionate change in quantity demanded.” ( Inforuge ) Generally, the price of a commodity, such as gasoline, reflects producers’ costs and consumers’ willingness to pay. Gasoline prices rise if it costs more to produce and supply gasoline, or if people want to buy more gasoline at the current price when demand is greater than supply. Gasoline prices fall if it costs less to produce and supply gasoline, or if people wish to buy less gasoline at the current price – that is, when supply is greater than demand.
Gasoline prices will stop rising or falling when they reach the price at which the quantity consumers demand matches the quantity that producers will supply. how consumers respond to price changes will affect how high prices rise and how low they fall. Limited substitutes for gasoline restrict the options available to consumers to respond to price increases. That gasoline consumers typically do not reduce their purchases substantially in response to price increases makes them vulnerable to substantial price increases how producers respond to price changes will affect how high prices rise and how low they fall. In general, when there is not enough of a product to meet consumers’ demands at current prices, higher prices will signal a potential profit opportunity and may bring additional supply into the market. How high prices have to be to bring in additional supply will depend on how costly it is for producers to expand output. In late 2006 and early 2007, orange crops in Florida were smaller than expected, and the crop in California was put in a deep freeze by an Arctic cold front. As a result, the production of oranges was severely reduced.
In addition, in early 2007, President George W. Bush called for the United States to reduce its gasoline consumption by 20% in the next decade. He proposed an increase in ethanol produced from corn and the stalks and leaves from corn and other grasses. What is the likely impact of these two events on food prices in the United States? For commodities such as coffee, oranges and wheat, the effect of climatic conditions can exert a great influence on market supply. Good weather will produce a better harvest and will increase supply. Bad weather conditions will lead to a poorer harvest, lower yields and therefore a decrease in supply. Changes in climate can therefore have an effect on prices for agricultural goods such as oranges. Commodities such as oranges are often used as ingredients in the production of other products, a change in the supply of one can affect the supply and price of another product. Higher orange prices for example can lead to an increase in the price of orange drinks.
These increased costs always funnel down to higher orange smoothies in shops and cafes. In the case of government intervention in the market, there is always a trade-off, with positive and negative effects. For example, a price ceiling may cause a shortage, but it will also enable a certain portion of the population to purchase a product that they couldn’t afford at market costs. Economic shortages are generally seen as hidden. These factors can contribute to a decrease in aggregate wealth. The creation in the Sarbanes-Oxley Act are very costly to publicly-traded companies. The companies are required to set up internal controls to ensure that financial reporting and other company governance actions do not cross any legal lines. The companies are then required to pay for a yearly independent audit to examine whether those internal controls remain in place. There are new requirements detailing how over the end-of- fiscal-year financial reporting should be conducted, as well as regulations on how to safeguard company assets and how to test and evaluate company management each year.
These requirements place a burden on publicly-traded companies, particularly smaller ones, and have led to some smaller companies deciding to leave the public realm to save the costs brought on by following the Sarbanes-Oxley Act and its provisions. A number of companies have gone private to avoid the provisions of Sarbanes or have gone dark, which entails removing all shares from any public trading and deregistering the company’s securities. Other small companies burdened by the additional costs of Sarbanes have sought mergers with larger companies. This type of business policy Would also effect the NYSE and NASDAQ. This would overall drive business away From these agencies because of increased economic costs.
By the creation of Sarbanes-Oxley this is nothing more than another creative tax on business. Taxation policy affects business costs. It is clear in business that a rise in a business’s taxes has the same effect as an increase in fixed costs. Businesses can pass some of this tax on to consumers in higher prices, however in the long run it will be another fixed cost on the business. Since a fixed cost does not change with an increase or decrease in the amount of goods or service produced, Sarbanes- Oxley Act would be another fixed cost to companies involved. Works Cited 1.Gasoline and the Economy. Retrieved July 19, 2012, from http://www.inforefuge.com/gasoline-economy