transportation economics

Comparative Analysis on Oil Supply

Supply is the quantity of goods that producers are willing to sell at a given price , while demand is the amount of goods consumers are willing to buy and have the capacity to buy at a given price ( Supply and demand

With the definitions given , it can be inferred that the supply curve has an increasing slope , which means that as the price of the good increases , the quantity that producers are willing to sell increases as well . On the other hand , the demand curve has a

decreasing slope as the price of good decreases , the more goods the consumers are willing to buy . The intersection of these two curves is the equilibrium point

With the scenario that we have , it is assumed that the two regions have the same demand for oil thus the demand curve of both regions is the same . The supply curve will be different for each region due to the fact that the Southwest region has a rich supply of oil while , on the other hand , the rest of the country is not so rich in terms of oil products For the oil-rich Southwest region , the supply curve will be less steep because the quantity of oil is already abundant , no matter whether the price increases or not . Whereas for the rest of the country , supply curve is steeper because there is not enough supply

The different characteristics of the curves for the two regions will give us different equilibrium points . The less steep supply curve will intersect with the demand curve at a lower price point than that of the steeper curve

Therefore , the rest of the country , with the steeper supply curve , will have a much higher price in oil since the oil suppliers will be willing to produce more oil for this region given a higher price . The Southwest region definitely has more advantage in terms of oil products compared to the rest of the country since there is abundance in oil . And with the same demand for oil in both regions , the Southwest region will definitely have more oil to sell in the market even for a lower price

Works Cited

Supply and demand . Wikipedia . 15 March 2006

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