Analyze any five of the following events: 1. The price of oil increases because

Question

Analyze any five of the following events: 1. The price of oil increases because Organization of Petroleum Exporting Countries (OPEC) reduces oil production. 2. The tax on gasoline consumption increases. 3. Firms start producing more fuel-efficient vehicles and produce fewer vehicles that use fuel inefficiently. 4. Summer arrives and more people choose to take vacations. 5. The price of gasoline increases. 6. The price of ethanol, a complement good, increases. 7. There is a large oil spill in the Gulf of Mexico. 8. Incomes fall because a recession begins and gasoline is a normal good. 9. Consumers desire more electric-powered vehicles instead of gasoline-powered vehicles. 10. A new production method allows two times as much gasoline to be refined per day. For each event, answer the following questions: a. Determine whether demand or supply changes or if the event instead causes a change in quantity demanded or quantity supplied. b. State whether the change is an increase or a decrease. c. List the determinant that led you to that conclusion.

Explanation / Answer

1. The price of oil increases because Organization of Petroleum Exporting Countries (OPEC) reduces oil production

a. Supply changed

b. Supply decreased

c. Determinant is reduction of oil production by OPEC led to lesser of supply of oil in the market

2. The tax on gasoline consumption increases.

a. the event instead caused a change in quantity demanded

b. quantity demanded decreased

c. Increase in tax increased the price of gasoline. Increase in price led to decrease in quantity demanded of gasoline

5. The price of gasoline increases.

a. the event instead caused a change in quantity demanded

b. quantity demanded decreased

c. Increase in the price of gasoline led to decrease in quantity demanded of gasoline

6. The price of ethanol, a complement good, increases.

a. the event instead caused a change in quantity demanded

b. quantity demanded decreased

c. Increase in the price of ethanol which is a complement good leds to increase in the price of main good. This led to decrease in quantity demanded of the main good

8. Incomes fall because a recession begins and gasoline is a normal good.

a. the event instead caused a change in quantity demanded

b. quantity demanded decreased

c. decrease in the income of people led to decrease in quantity demanded of gasoline. Income and demand of normal good are positively related

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