Essay Example on Price Variations of Commodities: Challenges to Equilibrium

In the market today, prices of various commodities tend to vary due to a number of factors. Some of which include but not limited to attitude by the customers, price variations of the commodity's substitutes and complementary, and even the effects of price control by institutions like government. For example, in this essay, introduction and high rates of adoption of the technological hybrids and modern electric cars may tend to pose a big challenge into the general equilibrium with other products majorly in terms of large price variations.

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It must be very true to say that indeed electric cars are much more environmentally friendly compared to the other regular vehicles with internal engines. Other more advantages enjoyed by the tested typical electric cars include the high percentage of cleanliness in terms of gas emissions (Diamond, 2009). Research has it that if by chance an electric car which uses moderate European electricity is equivalent to the best car with a fixed internal engine, this roughly gives an idea of how these two vehicles are perceived in the market by the customers. The research also highlights that there exists a strong relationship between gasoline prices and the adoption of these hybrid cars.

Gasoline is one of the major input products that may be used in place of ethanol for example in the production of the regular cars. Since the other vehicles are found of so much pollution and emission of harmful gases that reduce the life span of people, the public(customers) are recently boycotting it. Consequently, the hybrid and the electric cars have been invented to help in filling the gap left by failing to use the regular vehicles. In this way, then a general equilibrium has been established because, despite the effects such as the increased prices for corns used in the production of ethanol, the closes and relatively cheaper substitute for gasoline and even the high rates of oxygen contamination by through the process of emitting out harmful gases. The technology for hybrid and electric cars is, therefore, advancing to help in keeping the balance and reducing the possible effects that may arise to the effect of price variations of raw materials.

Secondly, in the case study 3.22 provided in this essay, the government finds itself suffering from selling its manufactured products, in addition, there is also a drastic reduction on the number of potential buyers in the market as many of the customers have lately shifted their interest to the products from other countries branded as exports.

Despite the effects caused by restrictions put in place by the government, they are still some mitigation plans that they can do to ensure that their market is restored back and that enough revenue is generated, and the economy is well sustained to its levels of requirements. One of the easiest and most effective ways to achieve this is by, withdrawing all the laws set for the mined product and convincing its citizens by use of various methods of advertisements to enable them to reach a wide number of people (Hart, 1997).

Another possible remedy is to, introduce other alternatives for the restricted mined products, with fair prices to all categories of people and with no restrictions added into it or them. It is therefore important to enable this so that the restricted product is specifically meant for the financing of the ongoing fight, and that other newly added products provide enough revenues to be used to run the institutional development projects and plans.

References

Diamond, D. (2009). The impact of government incentives for hybrid-electric vehicles: Evidence from US states. Energy Policy, 37(3), 972-983.

Hart, S. L. (1997). Beyond greening: strategies for a sustainable world. Harvard business review, 75(1), 66-77.