Question

34. Consider the following events (i) through (x). Decipher how each event will influence the world demand and supply of oil (shin len, shift right, or no shin) and resulting impact on the price of oil (up or down). Provide a brief (one sentence) reason why -1e. what determinants of supply or demand are changing to cause the resultant effect? If the answer is not clear, say so. (5 pls 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 OU SHIFTS. Same SUPPLY OF OIL SHIFTS: Upwards PRICE OF OIL MOVES: Upwards i, Brazil discovers massive oil reserves off its coast Reasoning in New electric powered cars are a hit with US consumers Reasoning Same ini. Global recession reduces consumer incomes worldwide Reasoning Downwards Downwards iv. Coal miners go on strike in Europe, many coal mines shut down Reasoning Upwards Upwards v. More efficient oil drilling equipment is introduced Reasoning

Answer 1

Solution Demand Price of oil Supply Right Shift Same Down - Because from to markets new reserves and it will oil will be supplied increase the market Supply with the same demand aware and higher Supply prices will be lower Supply of oil Prices Demand for oil shift left or Dowon same Down with the same supply and reduced demand prices will go down Demand will shift down because now electric Cars are being used Instead of diesel or Petrol cars. Pel - Movement on demand or Supply Curve occurs due to changes in prices only if other factors are changing the demand or supply then It will & shift the Curves. P P

Supply Prices Demand Left or Down shift same Docon Income decrease will decrease of oil so Demand shifts to with same supply prices will the demand down and go down Supply Pria Demand Upward shift Same Up oil are substitutes. So If . Coal are and Co. Coal is not So Demand will available shift up people will use oil. and so prices also. V) Supply Demand Same Prices Upword or Right shift Doon - More efficient production will reduce cost and this will increase supply on existing prices. So with same demand prices will go down