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Essay / Research Paper Abstract
A 6 page paper. The first part of this essay reports an article from the WSJ about the supply and demand of oil and corn, explaining how the demand impacts the supply and the affiliated cost issues. The second part of the paper discusses the law of diminished returns and provides three specific examples. Bibliography lists 4 sources.
Page Count:
6 pages (~225 words per page)
File: MM12_PGecn08.RTF
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Unformatted sample text from the term paper:
in China and India have increased the demand for oil, among other things. The demand and supply issues concerning these two commodities are different. In the case of oil, owners
can decrease the volume of production, leaving the oil in the ground until the owners expect the price of both oil and interest rates increase to the desired level. Interestingly,
while OPEC still has a strong influence over the price of oil, it is the actual owners of the oil who decide to adjust production and inventory until the price
of oil is expected to rise at the same rate as the interest. Thus, they control the supply. The demand has a strong impact on the price and when the
quantity is lower, the price can be higher. According to this author, oil owners produce more oil, i.e., increase the supply, when they expect the price of the oil
and the interest rates will rise at the same rate. If the price for the oil is expected to increase at a greater rate than the interest, they lower production.
When demand increases, such as the demand in China has increased greatly, oil owners inferred that the future price of oil would be higher than they expected so they reduce
supply, which raises the spot price of oil until the expected price returns to its initial rate. The spot price for oil changes when expectations about future prices change.
The rising prices of oil have spurred a renewed interest in alternative fuels, one of which is ethanol, made from corn. This increase in the demand for ethanol raised
the price of corn. Additionally, there has been increased demand for corn as an agricultural product, i.e., food. Feldstein said that at this time, corn is not very price-sensitive in
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