Current Event Article: Practical Application of the Concept of Elasticity
The applicability of different economics concepts occurs in the activities of business organizations, economies, and individuals’ decision-making. The concept of elasticity has wide application in the decision-making of an individual consumer, organizations, and the entire economy. This paper will analyze the elasticity article “Prospects for a U.S. Oil-export boom” published in the Wall Street Journal on 13th, January 2017, which relates to the feasibility of the United States to raise oil production (Strumpf, 2017). The article focuses on the capacity of the US to increase its oil production to improve its sale of crude oil in other countries (Strumpf, 2017)
The ability of the United States to increase its oil production and supply to the global market will require the application of elasticity to measure the expected outcomes of this decision. Price elasticity measures the extent to which the market demand responds to changes in prices while the elasticity of supply measures the degree of change in the market supply for a product or service as a result of the pricing strategy adopted by a firm (Lakhotia, 2017). The US will consider the elasticity of supply before it decides to increase its oil production. If the supply of crude oil in the global market is elastic, any decision to change the price will lead to a significant change in the quantity supplied. Thus, before the decision to increase oil production is made, the US will have to assess the level of elasticity of supply for crude oil.
The elasticity of supply applies to production decisions where firms or an economy anticipate changes in the quantity supplied after a certain pricing decision depending on the nature of its products or services. Therefore, the United States will have to estimate the elasticity of supply before it ventures in increasing the production of oil to ensure high market performance of this product. The information found in this article is useful in guiding business organizations economies on how different elasticities apply to their activities. Besides, the article provides critical insights to how economic concepts apply in various activities of business organizations in the real world.
References
Lakhotia, G. (2017). Elasticity of demand and its practical importance. Retrieved January 15, 2017, from https://economics.knoji.com/elasticity-of-demand-and-its-practical-importance/
Strumpf, D. (2017). Prospects for a U.S. Oil-export boom. The Wall Street Journal . Retrieved from http://www.wsj.com/articles/u-s-oil-export-prospects-1484281512
