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Everyday Gasoline

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Submitted By goldenangel
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Question 1 : Everyone’s Gasoline Problem
Gasoline prices are affected by the seasonality that is driven by the demand and supply patterns, as well as the local competition. The demand for gasoline increases during summer as people drive more due to favorable weather conditions. As the demand for gasoline increases, gas prices at the pump increases to earn more profits.

From the graph, it is clear that the price of gasoline shot up to $4 a gallon in July 2008 (GasBuddy.com, 2011). This was mainly due to the increase in crude oil prices that was settled at $147 per barrel. However, in December 2008, the crude oil prices dropped to $40 a barrel as a result of which gasoline prices dropped to $1.69 a gallon. It seems that the record high prices encouraged people to drive less, which in turn drove down demand and subsequently, prices. Price increases generally occur when the world crude-oil market tightens and lowers inventories. Also, growing demand can sometimes outpace refinery capacity. In the spring, refineries perform maintenance, which can place a pinch on the gasoline market. By the end of May, refineries are usually back to full capacity (Bonsor, & Grabianowski).

Local retail station competition also plays a considerable role in the fluctuation of gas prices. Since a neighborhood would have many gas stations, each station has to adopt equivalent pricing policy as any increase in gasoline price would cause the customers to migrate to an adjacent gas station charging lesser price for gasoline.

Chapter 5 – 17 : Potato Chips vs Computer Chips
Part a: In a given market period, if the demand for potato chips increases, the potato chip plant would be positively impacted by the situation. It will make considerable profits out of the new situation by increasing its production. Potato chips segment, with 34% of the share, is the leader in the

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