Suppose due to the deepening crisis in the Middle East, there is a hike in the crude oil price. Using a demand-supply framework, model the effects of a crude oil price hike on (a) the petrol market, the big car market and the small car market (b) (c)

Suppose due to the deepening crisis in the Middle East, there is a hike in the crude oil price. Using a demand-supply framework, model the effects of a crude oil price hike on (a) the petrol market, the big car market and the small car market (b) (c)

Survey of Economics (MindTap Course List)

9th Edition

ISBN:9781305260948

Author:Irvin B. Tucker

Publisher:Irvin B. Tucker

Chapter4: Markets In Action

Section: Chapter Questions

Problem 19SQ

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Concept explainers

Inflation and Purchasing Power Theory

In economic terms, Inflation refers to the increase in the costs of various commodities which are used in daily lifestyle like food, clothes, transport, etc. over a specific time. It may lead to a fall in the purchasing power of the people and also affects the exchange rate of the currency because of the price increase. As the purchasing power falls the unit of the currency in the economy falls. When the prices of the commodities are decreased, then the purchasing power of the consumers will rise, then it will lead to deflation and changes the currency of the base economy to that of the foreign economy which will lead to change in exchange rates.

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Suppose due to the deepening crisis in the Middle East, there is a hike in the crude oil price.
Using a demand-supply framework, model the effects of a crude oil price hike on
(а)
the petrol market,
the big car market and
(c)
the small car market

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