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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

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, state how the event will affect the supply and demand diagram. Create a sketch of the diagram if necessary.

a. Cars are becoming more fuel efficient, and therefore get more miles to the gallon.

b. The winter is exceptionally cold.

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.

A

To determine

Show how the following situation would affect the equilibrium price and quantity of oil.

(a) Cars are becoming more fuel efficient.

Explanation

(a) As cars are becoming fuel efficient, less oil is required now. The demand for oil shifts to left from D to D’. The price of oil decreases from P to P’ and quantity decreases from Q to Q’...

To determine

Show how the following situation would affect the equilibrium price and quantity of oil.

(b) The winters are very cold.

To determine

Show how the following situation would affect the equilibrium price and quantity of oil.

(c) Discovery of new oil in Norway.

To determine

Show how the following situation would affect the equilibrium price and quantity of oil.

(d) The oil using economies slow down.

To determine

Show how the following situation would affect the equilibrium price and quantity of oil.

(e) The oil pumping is disrupt by war in the Middle East.

To determine

Show how the following situation would affect the equilibrium price and quantity of oil.

(f) Additional insulations are installed by landlords.

To determine

Show how the following situation would affect the equilibrium price and quantity of oil.

(g) The solar energy gets cheaper.

To determine

Show how the following situation would affect the equilibrium price and quantity of oil.

(h) Chemical companies has invented a new plastic made from oil.

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