Class: ECON130

Name: Seowon Jung

Instructor: Barbara Ross

Source: Wall Street Journal, B1, Sep-29-2008

Still makers in the U.S decided to reduce outage because demand for steel has been decreased by the credit crisis. Besides, automobile and construction markets are becoming slowdown. Some of steel makers predict and already provide against emergencies that they will not keep earning revenues in the years second half. Although the some of law material costs were decreased, it seemed that didnt give any effects. Therefore, they have planned to reduce output by about 15% in this year.

The steel is raw material to build roads, bridges and office buildings. The reason of decreasing demand for steel is that some projects are postponed or held by unpredictable financial market; and slowdown in automobile and construction markets. Moreover, the steel buyers are purchasing only what they immediately need; and they do not want to overstock the steel in their factories because the price of the steel might be increased later. However, unfortunately, demand from other countries will not be substituted for domestic growth. Therefore, because the demand has been decreases, supply and the equilibrium price will be decreases. Especially, in this case, equilibrium quantity and demand will be decreased. Because, the reason of decreasing demand for the steel is not only due to high price but also the credit crisis. Besides, many steel users dont want to overstock the steel in their factories and want to use immediately the steel as soon as purchasing. Therefore, equilibrium quantity will not be increased. Besides, there is another reason about decreasing supply. The steel maker decided to reduce outage.

In conclusion, the related market, which is every market using the steel such as automobile, construction, heavy machinery, and military weapons, will be depressed. Equilibrium quantity and price would be placed a specific point. Demand started to decrease, and therefore supply price, and quantity will be decreased. Furthermore, equilibrium quantity and price will be decreased, too. So, price, demand, supply, equilibrium quantity and price will be decreased. Therefore, only the customers gain, the steel users such as the construction and automobile companies lose due to slowdown in their market, and steel maker will be lost too due to the steel users.

ECON130-31041
Name: Seowon Jung 

Instructor: Barbara Ross

Source: gulfnews.com 11/16/2008
 

Summary:

The oil price is going down. The Dow Jones Industrial Average was 337.94 points on 11/14/2008 and the Chicago Board of Options Exchange is seeing options to sell oil at $30.00 a barrel now. The oil buyer has not been interested in buying the oil for almost 2 years because of too low price to make profits. The Brent is selling $53.85 as priced 60 percent off. The largest oil consumer in the world, U.S, has reduced their oil expenditure about two million barrels per day. 

Analysis:

First of all, the U.S, the largest oil consumer, has reduced oil expenditure due to the economic slump is the most important point. The oil doesnt have any substitutions and complements. Indeed, we can use the solar power, electricity for the hybrid car and any other nature resources for what we need but they are not popularized yet. Even though the oil producer will keep producing it in order not to make more loss by fixed cost but consumers demand wont be changed. As a result, the oil price wont be increased. Therefore, the demand curve will be moved to the left and getting inelastic; and the supply curve wont be changed before the oil market will be buoyant. The oil market is kind of oligopoly market because only a couple of countries can produce the oil. Their association, OPEC, decides the output and even the price. Therefore, decreasing demand of an oligopolistic good like the oil is an exceptional case. Besides, it is an evidence to prove that this blow of an economic slump is serious problem.

Conclusion:

The price between willing to sell and willing to buy is not matched. Consumers are reducing or not buying the oil; and the oil trader is not attracted by the oil. As a result the oil price has been decreased and mediated by invisible hand. After the economic slump at this present, if we could overcome from this economic sump, the demand curve will be moved to the right and elastic. However, the supply curve will be inelastic and the oil output wont be changed because the oil output, supply and price are decided by OPEC. Besides, the demand for oil will be the price inelastic in the short run but elastic in the long run.

Name: Seowon Jung