DiscussWorldIssues - Socio-Economic Religion and Political Uncensored Debate - View Single Post

**LeviBrawn** · 12-05-2007, 12:36 PM

I mean when something is in higher demand, they can sell it for cheaper. That is why Sweden is generally more expensive than the UK and why the US is cheaper than the UK

Regrettably, while certainly ceteris paribus this would make sense in a Supply and Demand model, this is not the case in real life. The gasoline industry, due to dwindling supply and regional political instability (which lends itself to higher transaction costs due to requisite security and the like), is experiencing DRASTIC diseconomies of scale - requiring a higher price per gallon in order to cover marginal costs. This is greater impacted given that the oil cartels create a very monoplistic competition in the gasoline market, such that prices will be higher as their demand function is greater disparate from the market demand, and mapping a proper revenue point per gallon to find proper equilibrium (such that you're exercising allocative and productive efficiency) will produce a higher product of Price and Quantity Demanded.

Yay, economics major.

Last time I was at the pump, it was $3.35 per gallon for Unleaded. This was pretty cheap for the area. It was an Arco, which I've noticed has much cheaper prices as a chain.

12-05-2007, 12:36 PM	#27
LeviBrawn Join Date Oct 2005 Posts 638 Senior Member	I mean when something is in higher demand, they can sell it for cheaper. That is why Sweden is generally more expensive than the UK and why the US is cheaper than the UK Regrettably, while certainly ceteris paribus this would make sense in a Supply and Demand model, this is not the case in real life. The gasoline industry, due to dwindling supply and regional political instability (which lends itself to higher transaction costs due to requisite security and the like), is experiencing DRASTIC diseconomies of scale - requiring a higher price per gallon in order to cover marginal costs. This is greater impacted given that the oil cartels create a very monoplistic competition in the gasoline market, such that prices will be higher as their demand function is greater disparate from the market demand, and mapping a proper revenue point per gallon to find proper equilibrium (such that you're exercising allocative and productive efficiency) will produce a higher product of Price and Quantity Demanded. Yay, economics major. Last time I was at the pump, it was $3.35 per gallon for Unleaded. This was pretty cheap for the area. It was an Arco, which I've noticed has much cheaper prices as a chain.
	Quote