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Changes in the price of a key commodity

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How would government react to sudden, large changes in the price of a key commodity, such as gasoline, electricity, or prices on stocks on the New York Stock Exchange?

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Solution Preview

How would government react to sudden, large changes in the price of a key commodity, such as gasoline, electricity, or prices on stocks on the New York Stock Exchange?

SOLUTION

The social and economic development of human societies is inextricably linked to energy use. However, in developed countries today the linkage between growth in energy consumption and economic growth shows signs of de-coupling. An energy crisis is any great shortfall (or price rise) in the supply of energy resources to an economy. It usually refers to the shortage of oil and additionally to electricity or other natural resources. In a market economy, the price of energy supplies such as gasoline or electricity is driven by the principle of supply and demand, which can cause sudden changes in the price of energy if either supply or demand changes. However in some cases an energy crisis is brought on by a failure of the market to adjust prices in response to shortages.

In most of the cases the sudden change in prices come from the supply shock. The rapidity of the increase in gasoline prices has made ...

Solution Summary

A stock exchange in New York City is overviewed.

$2.19