Question

With the prospect of a full-blown crisis in Ukraine in 2014, the price of commodities that were heavily dependent on Russia and Ukraine for supplies, such as wheat, oil and European natural gas rose. Which of the following describes the impact of the crisis in Ukraine on the price of these commodities? 

• The supply curve shifts outward against a demand curve which remains the same. 

• The supply curve shifts inward against a demand curve which remains the same. 

• The demand curve shifts outward against a supply curve which remains the same. 

• The demand curve shifts mward against a supply curve which remains the same. 

• The demand shifts inward and the supply curve shifts outward.

Answer 1

Since supply was heavily dependent on Russia and Ukraine so, after the crisis the supply curve will shift to its left, that is the supply will decrease. Thus increase in price of commodities.

The supply curve shift inward against a demand curve which remains same.

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