Question

34. Consider the following events (i) through (X). Decipher how each event will influence the world demand and supply of oil (shin left, shirt right, or no shin) and resulting impact on the price of oil (up or down). Provide a brief (one sentence) reason why - i.e. what determinants of supply or demand are changing to cause the resultant effect? If the answer is not clear, say so. (5 pts each) (Tip: A demand and supply diagram for the oil market as it is the easiest way to track price changes when the curves shift) EVENT: DEMAND FOR OIL SUPPLY OF OIL PRICE OF OIL SHIFTS: SHIFTS: MOVES: i. Brazil discovers massive oil Same Upwards Upwards reserves off its coast Reasoning: Same ii. New electric-powered cars are a hit with US consumers Reasoning: Samne Same iii. Global recession reduces consumer incomes worldwide Reasoning: Downwards Downwards iv. Coal miners go on strike in Europe, many coal mines shut down Reasoning: Same Upwards Upwards v. More efficient oil drilling equipment is introduced Reasoning

the first photo has the question and the first graph the 2nd picture is the rest of the graph. thank you ?

Answer 1

i. The demand curve remains constant, supply curve shifts to the right (increases) as oil reserves are discovered. The price of oil falls and quantity increases. Massive oil reserves will increase supply of oil.

ii. Demand curve shifts to the left as demand for oil falls. Supply curve remains same. The equilibrium price and quantity fall.

iii. Demand curve shifts to the left as demand for oil falls due to fall in consumer income . Supply curve remains same. The equilibrium price and quantity fall.

iv. Demand curve remains the same. Supply curve shifts to the left ( falls), the equilibrium price rises and quantity falls.

v The demand curve remains constant, supply curve shifts to the right (increases) as cost of production falls. The price of oil falls and quantity increases.