ECONOMICS
DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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a movement upwards along the supply curve for oil
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a movement downwards along the supply curve for oil
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a shift to the right to a new supply curve for oil
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a shift to the left to a new supply curve for oil
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Detailed explanation-1: -The correct answer is c. If a large new reserve of crude oil is discovered, the price of this input will decrease, and as a consequence, the supply of gasoline will also increase. That is to say, gasoline suppliers will be able to supply more quantity at any given price (the supply curve shifts to the right).
Detailed explanation-2: -The decrease in demand for oil will be shown as a leftward shift in the demand curve. As the demand curve shifts down the supply curve, both equilibrium price and quantity for oil will fall.
Detailed explanation-3: -Decline curve analysis is a long established tool for developing future outlooks for oil production from an individual well or an entire oilfield. Depletion has a fundamental role in the extraction of finite resources and is one of the driving mechanisms for oil flows within a reservoir.
Detailed explanation-4: -An increase in oil prices usually lowers the expected rate of economic growth and increases inflation expectations over shorter horizons. Decreasing economic growth prospects, in turn, lower companies’ earnings expectations, resulting in a dampening effect on stock prices.