Gas Pipeline Essay Example | Topics and Well Written Essays - 1000 words

Gas Pipeline - Essay Example The ability of suppliers to supply gas have been drastically reduced resulted in a shift in the supply curve to the left as can be seen on graph 2 below. This resulted in the equilibrium point moving left from E1 to a new point E2 on the graph on the intersection point of the supply and demand curves . Another fact that can be derived from the above graph is that a small shift in the supply of gas will result in a larger shift in price. The reason for this is that gas is not a luxury but a essential product for most people and businesses, and this is indicated on the graph by a much steeper demand curve than normal, meaning the demand curve for gas is less elastic. Even so a increase in price will result in a marginal decrease in demand as people restrict driving for essential reasons only, such as going to work to conserve gas. It would not have resulted in a shift of the demand curve as there was nothing really forcing a increase or decrease in the demand for gas, except the increase in price. Additionally the drop in gas supply and the resulting increase in price would also have effected many other market contributors. The distribution of products onto the market is done by a transport system, and a large part of this system is fueled by gas, such as trucks and delivery vans. The suppliers of these products would have paid more to be able to distribute their products to shops and malls, so the price of these commodities would have also gone up, negatively influencing their demand. The above can be seen as the behavior of a open market influenced by buyers and sellers naturally driving the market towards a equilibrium. When prices are above the equilibrium point and there is a surplus of goods, it will cause market prices to fall (Mankiw, Gregory, 2004). In the above case study we had a price below the equilibrium point as there was a decrease in supply, causing market prices to rise. Cited Page 1. Pump Price Graphs. ArizonaGasPrices.com. 2003 - 2006. Accessed 29 March 2006. www.ArizonaGasPrices.com/retail_price_chart.aspx 2. Arizona Gas Prices. Gas Price Comparisons. Accessed 29 March 2006 http://www.arizonagasprices.com/ 3. Mankiw, Gregory. Principles of Economics.