Answer to Question #201561 in Economics for fatima usman

Question

In February 2005 Kuwait opened a new port extension, said to be the largest and most advanced

in the Middle East, near the country’s main oil refinery. It took 3 years to build, can accommodate

four supertankers at the same time, cost £187 million and is hoped to last at least 30 years.

Kuwait is actively seeking new markets for its planned increase in oil production.

(a) Explain, using demand and supply analysis, why Kuwait might want to seek new markets

when it increases its oil production. 

(So you have to make a demand and supply graph, and also explain the answer in detail, please hurry I'm in a rush.)

Answer 1

(a) When Kuwait increases its oil production, the increase in supply will cause a decrease in equilibrium price. That's why Kuwait might want to seek new markets to compensate this decrease in price with increase in demand for oil and resulting increase in equilibrium price.