Question

Module 4 Demand and Supply: 4a. Draw a demand and supply graph for China's economy. The corona virus shut down production and disrupted economic activity. There is concern that the Chinese economy will go into a recession and in turn impact other countries such as the United States. In particular, China's demand for oil will be impacted. Explain using a demand and supply graph what happens to the price of oil and the quantity when the Chinese economy goes into a recession and they do not require as much oil. (Hint - there is a similar question in a handout in Module 4 resources. Please label your graph correctly. (10 points) 4b. Explan what happens to price and quantity when demand and/or supply shifts. You should draw a graph as this will help you. Fill in the table below (three boxes have been filled as examples (10 points) Demand Decreases Supply is unchanged Demand is unchanged Price is unchanged Quantity is unchanged Demand increases Price increases Quantity increases Supply increases Price decreases Quantity could increase, decrease or be unchanged Supply Decreases Price increases Quantity decreases

Answer 1

A-4 a The initial equilibrium in the oil market occurs at point E. Recession in China will lead to fall in the demand for sit and chilt the demand curve for leltwards to old! and at new equilibrium point Ę price of oil has decreased and new equilibrium a a Quantity has also decreased by Box 1. Supply is unchanged, demand decreases This leads to Price decreases Quantity decreases : brice TK Box 2: Supply increases demand is unchanged. Price decreases Quantity increases. This causes : y 01 Rox3: supply & demand increases Price can increase, decrease or remain unchanged auariteity increases . -- - l increases ! est. Box 4 supply decreases, demand Boks Bot supply & demand decreases TE Price Increases Quantity could increase, decrease or remain, unchanged. Quantity decreases increase or decrease or unchanged brice can remain