Topic 5: Ripple Effects and Elasticity

Topic 5: Ripple Effects and Elasticity

Oil, which is considered as one of the most important resource in contemporary society, provided the essential energy for human’s vehicles and transportations. By looking at the ripple effect, we can understand the concept of one change of just a little thing can potentially influence subsequent events. Therefore, it’s hard to predict the price of oil; as a result of not only the 2/3 was controlled by one country but also the instable elasticity of oil. Both my father and mother have to drive car to work everyday; therefore, even though the cost of oil is a big concern for them, my parents will not reduce their demand for oil, because they don’t have substitute transportation except cars. For our family, the graph of oil’s price and demand can look like. By looking at the graph, we can see when price of oil, the demand for oil does not change. Inter-connectedness, also known as ripple effect, can be the connection among oil -> plastic -> apple productions -> me (buyers.) Another instance for inter-connectedness of oil can be what kind of cars consumers buy due to the price of oil. In order to save expenditure on oil, more people tend to buy hybrid car, or even electronic car. By doing so, people can not only save the expense on soil but also reduce the pollution in our environment. Looking at the elasticity of oil, there’s unit elasticity for oil’s price and quantity, but we are not sure. The simplest way to figure how the unit elasticity is when the price and quantity reach to the maximum point and start going down.