Answer to Question #152951 in Macroeconomics for farah

Question

Many changes are affecting the market for oil. Predict how each of the following events will affect the equilibrium price and quantity in the market for oil. In each case, sketch a supply and demand diagram to support your answer.
a. Cars are becoming more fuel efficient, and therefore get more miles to the gallon.
b. b. The winter is exceptionally cold.
c. c. A major discovery of new oil is made off the coast of Norway.
d. The economies of some major oil-using nations, like Japan, slow down.
e. A war in the Middle East disrupts oil-pumping schedules.
f. Landlords install additional insulation in buildings.
g. The price of solar energy falls dramatically.
h. Chemical companies invent a new, popular kind of plastic made from oil.

Answer 1

a)    The equilibrium will shift to the right . the quantity demanded will increase and prices will increase.

the quantity demanded will increase and equilibrium price will increase

b)as a result of winter being cold people will not travel and as result the quantity demanded will decrease and prices will fall

c.

the supply of oil will increase and prices will fall due to the discovery of new oil

d the quantity supplied will decrease and demand will increase as the same price will increase

e.the prices will increase and quantity supplied will decrease and demand goes high

f.this will not have an effect of oil demand and prices

g.the demand for oil will reduce as people will use solar energy. The prices will decrease as a result of decrease in demand

h. the equilibrium price will decrease and quantity supplied will increase and the demand will increase.