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As mentioned in my answer to the question you asked yesterday, microeconomics is the study of the lower levels of the economy. Microeconomics studies the economic behavior of individual households, individual firms, or even whole sectors of the economy. It studies everything except the functioning of the entire economy of a given region or country. Because microeconomics could involve the study of every company involved in the extraction, refining, and selling of oil, there are innumerable microeconomic questions that we could ask. Let us look at three of the more important questions.
First, we can ask what would happen to the number of miles driven by Americans if the price of oil were to rise. This would be important to many sectors of the American economy (gas stations, motels, auto makers, etc.) and it would be important to the environment as it would impact the amount of greenhouse gasses emitted by automobiles.
Second, we could ask how changes in the price of oil would affect specific companies. For example, airlines are heavily impacted by the price of oil as fuel costs make up a large portion of their overall operating costs. Airlines have to monitor the factors that are likely to change the price of oil. They also have to do things like entering into contracts to “hedge” against the possibility of changes in the price of oil. Thus, the impact of oil prices on the airline industry is an important microeconomic question for some companies in relation to the use of oil.
Finally, we could ask what would happen to the trucking and railroad industries if oil prices were to rise. These industries are important to society as a whole because they move so many of the goods that we buy as consumers. It is possible that the trucking industry would suffer badly if prices rose because companies that had freight to move might start sending that freight by rail, which is somewhat cheaper, if less convenient, than trucking.
All of these are examples of economic issues that are related to the use of oil and which could face society as a whole and/or individual companies.
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