EVERYDAY SCIENCE

Detailed explanation-1: -When oil prices rise, costs for production and transportation rise, which decreases supply at a given price. If oil prices fall, production and transportation costs fall, so more can be produced at a given price. Demand then increases or decreases in response to the supply fluctuations.

Detailed explanation-2: -What would happen if the demand for oil increased? Quantity supplied would increase.

Detailed explanation-3: -Conversely, the law states that the price of any item will decrease if the demand for it decreases or the supply for it increases. This is the same with oil, and there are many factors that impact the supply and demand of oil.

Detailed explanation-4: -Falling oil prices often affect activity and inflation by shifting aggregate demand and supply and triggering policy responses. On the supply side, lower oil prices lead to a decline in the cost of production.