Elasticity of Demand of Petrol and Cng

pic BUSINESS ECONOMICS FINAL REPORT ON ELASTICITY OF pack OF PETROL AND CNG SUBMITTED TO SIR FAISAL SULTAN QADRI PREPARED BY Syeda Tabinda Naz Anum Zehra Madiha Khan ACKNOWLEDGEMENT We owe our profound thanks and deepest gratitude to ALMIGHTY ALLAH, most merciful, who blessed us with determination, strength, expertness and providential help to fill out this report. This Report is on ELASTICITY OF DEMNAD OF PETROL. This report is a part of our course titled as Business economics conducted in Iqra University. indeed we would like to acknowledge our course instructor Mr.Faisal Sultan Qadri to give us an opportunity to work on this project, and allow us to crystallize use of our uninflected abilities. It was his guidance and never ending patience that lead us to complete this report. Our special thanks to our beloved p bents and friends without their support we would not be able to complete our assignment and their coordination has made us able to achieve the task in time. INTRODU CTION High hurts effect every champion everywhere, but not equally. Petroleum pricing is something that right off effects every one in society as it is also major(ip) source of power and kindle. DEMANDDemand is defined as the bequeathingness and ability of a consumer to purchase a given crossway in a given frame of time. DETERMINANTS IF DEMAND Overall adopt can swap, moving upward(a) or downward, because of changes in P = price of other goods (substitutes and complements) I = in get on N =no. of buyers T =tastes and preferences Ex =expectations CHANGE IN INCOME With the rise in income of plenty they can increase the usage of product which will result in increased beg. CHANGE IN PRICE Change in price will also result in demand curve of that product. Here we will discus the effect of change in price of throttle on its demand of consumption.CAR AND PETROL OR CAR AND CNG (Petrol Vs CNG) The general trend is that when the price of the substitute decreases the demand of the prod uct decrease and if the price of the substitute increases demand for the product increase. In my sense, the petrol and CNG are the substitutes to each other. Now if the prices of the Petrol increase the demand for petrol will change. Many people will tend to make their Car CNG cylindered. But if the hurt of the CNG increase, but it will remain lower to the price of the Petrol, so it will not affect much more to the demand of the CNG. No one will change their CNG Kits.So it means that the petrol is more elastic than the CNG in terms of Demand. Petrol has more elasticity than CNG. In Pakistan the majority of private vehicles have converted to CNG because of cheaper price as compared to petrol. Only luxury railway cars and official vehicles now run on petrol. Almost all car manufacturers in Pakistan now produce company fitted CNG kit versions. Recent hikes in CNG prices have downplayed the ambitious ventures of some of the stakeholders in this sector. It is expected that price of the CNG and Kits will come down as competition among manufacturers grows.LandiRenzo Pakistan is also exporting CNG kits to various countries including China, Brazil and Italy. Almost 2 million vehicles on the countrys roads have dual fuel options. ELASTICITY OF DEMNAD Given are the prices and quantity of petrol showing elasticity of demand after an increase in price of petrol When price of petrol was 31. 8/litre in 2000, using cng in cars was not common but as petrol prices began to raise many people be apparent to make their Car CNG cylindered because cng prices were very cheap and stable as compare to petrol prices.Now the current price of petrol is 66/litre and the price of cng is 48/kg still very economical for drug users. According to International Association of Natural Gas Vehicles, as of December 2008, Pakistan has the worlds highest frame of vehicles running on compressed Natural Gas (CNG). The number is 2 million. Pakistan also has the Worlds highest number of CNG refueling stations. Because Petrol prices in Pakistan are among the highest in the region as well as natural gas is found abundant and locally in Pakistan so this also very major reason of its cheapness.In 2000 the total number of vehicles in Pakistan was 4. 9 million which has increased to 8 million in 2009. By March 2006 about one million vehicles were converted to CNG as compared to 700,000 vehicles during the same period last year, showing an increase of 43 per cent. With these developments Pakistan has become the leading country in Asia and the third largest user of CNG in the world after Argentina and Brazil. We can calculate the elasticity of petrol easily by considering its change in price within year. Price Quantity 59 8000000 million 6 6000000 million Solution Formula required for cross price elasticity change in quantity/change in price x PY/QY 2million x62. 5 7 7million =285714. 28 x 0. 000009 =2. 57 Hence demand is elastic and petrol and cng are substitutes. GRAPH screening EL ASTICITY OF DEMAND OF PETROL pic References http//www. pakistaneconomist. com/issue2002/issue4/f. htm http//pakistaniat. com/2009/07/14/pakistan-cng/ http//www. thenews. com. pk/editorial_detail. asp? id=162379 http//www. brecorder. com/index. php? id=262150=2=