Chapter 6, Gasoline Prices

Article: http://usnews.rankingsandreviews.com/cars-trucks/daily-news/110412-Gas-Price-Rise-Americans-Drive-Less/

Summary:

               Apparently, American citizens are experiencing a elastic change in gas prices. The sudden increase of prices were so sudden that it caused citizens to drive less. Which is a good thing however, they're are pros and cons to this situation. As stated in the article, "the average price of gas is an obvious indicator of why national fuel consumption is dropping. At the end of March, companies reported that gas reached an average of $3.60 nationally." The worse case scenario that could likely occur is that consumers could pay more than $5 dollars a gallon (Note that every gallon = approximately 4 litres) due to the insufficient supplies.
               It's also been stated by a president from the Shell Oil company that again, $5 dollars a gallon could happen during 2012. As I mentioned before, companies noticed that consumers are responding to the changes in gas prices and that is good because eventually the prices of gas will have to deflate in order to create demand again.

Connection:

               In chapter 6 we discussed mostly about aggregate demand because it was important to know what it meant. As we all know Aggregate demand is the total demand for goods and services in the economy also there is a similar term to aggregate demand which is Gross Domestic Product (GDP). Aggregate demand could be the curve that tells you what level of goods demanded at each price level whereas, GDP is actual level of goods exchanged.
               So back on-topic, there are several factors that could affect gasoline prices such as expecations and prices. Since gasoline prices are inflating and consumer behaviour is changing, the prices are likely to influence the level of consumer spending because the change of prices made a impact with consumers. Expectations could be another factor due to the predicament of gasoline prices. Since the article mentioned that by 2012, the gasoline prices could possibly increase to $5 dollars a gallon then in that case consumers could expect themselves to purchase gas prices right now and learn to save. Then once 2012 comes, consumers are assumed to more likely cut back on spending and increase on their savings also note that, this will cause an impact on the total level of consumption to drop.

Reflection:

               Over here in Canada, gas prices are around $1 to $1.30 per litre. So United States gas prices could be a $1 dollar different from ours which is quite significant. I would like to discuss about the GDP of United States relating to this article. Perhaps United States, GDP is still probably the first but eventually it will decrease because I have begun to notice that Americans are more focus on saving their earnings rather than spending. This is probably why our currency comparison with US is almost the same as well as, our GDP is increasing slowly. In my opinion, this article was quite interesting because I was able to discussed certain factors that affected GDP and discussing about a countries GDP can be quite exciting.