00:01
All right, so we are doing question number four from chapter three, and it's asking us about a bunch of different situations in the market for oil.
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And as you may know by now, every one of these can be described by a classic supply and demand curve.
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So as we know, price goes on the y -axis, quantity on the x -axis.
00:28
This is our equilibrium.
00:32
And so for part a, it's asking, if cars become more fuel efficient and get more miles to the gallon, what's that going to do to the price or the market for oil? so if cars are becoming more fuel efficient and getting more miles to the gallon, that means, well, people are going to want less oil.
00:46
They're going to want less gasoline.
00:47
And that's going to be a demand shift down for oil.
00:53
And so now this is a new equilibrium.
00:55
That's our second demand curve.
00:56
And what does that mean? well quantity has fallen price has fallen so price and quantity both go down now for part b again supply demand price quantity um so b is asking the winter is exceptionally cold and i'm interpreting this as saying if the winter is cold well people are going to want oil to keep them warm so what's that going to be well it's just going to be the opposite that's going to be an increase in demand and what happens? well, quantity goes up, price goes up.
01:36
Okay, so for part c, geez, that was very poorly drawn.
01:41
For part c, again, we're doing supply and demand, price, quantity.
01:52
Part c is asking, just a second, a major discovery of new oil is made off the coast of norway.
02:01
And so what's that going to be? well, that's going to be affecting the opposite thing.
02:04
That's going to be affecting supply.
02:06
And if more oil is being found, that means supply is going up.
02:10
Supply is getting shifted up.
02:12
It's getting increased.
02:12
A shift right.
02:14
All synonymous.
02:15
And what's going to happen here? well, quantity is going to go up as it moves to the new equilibrium, but price is going to go down.
02:24
So price and quantity are going to go down.
02:27
Now for part d, i know these are pretty sloppy supply and demand diagrams, but you know, the hang of them pretty quickly.
02:39
Part d is asking, the economies of some major oil using nations like japan, slow down.
02:45
So if the economy is slowed down, that's a recession, which means the demand for everything is falling because, you know, you want to save your money or, you know, you want to spend your money less.
02:57
So the demand for everything is falling, including obviously oil.
03:02
So demand will fall.
03:05
And again, as we saw with a demand shift, demand falls.
03:13
As we saw with a demand shift, that's going to lead to decrease in price and quantity.
03:21
For part e, supply demand, that was poorly drawn.
03:31
Okay, part e, a war in the middle east disrupts oil pumping schedules...