Case Readings:
Using the case assignment readings, answer the following questions in 4 page essay.
1. How do changes in supply and demand effect oil prices?
2a. Explain what happens to quantity of oil demanded when the price of oil decreases, assuming that the supply doesn't change. (Hint: Law of demand, movement along the curve).
2b. Explain what happens to the price of oil and quantity of oil supplied when Congress approves drilling for the reserves in Alaska, assuming that the demand doesn't change. (Hint: Law of supply, movement of the curve).
2c. Explain what happens to the price of oil and quantity of oil demanded when if China experiences rapid economic growth, assuming that the supply doesn't change. (Hint: Law of demand, movement of the curve).
For each event, you must specify how it effects either demand, quantity demanded, supply, or quantity demanded. Please use the background material to find the appropriate term. It is also important to demonstrate how the change will affect the market demand or supply curve. Also, be sure to state any assumption you are making regarding the relationship of the event and oil.
e.g. The increasing use of plastics to produce a wide range of products.
Assume that petroleum products are used as a factor of production. This will increase the demand of oil and shift the demand curve to the right. This will cause the price and quantity of oil to increase.
3. Gas prices have reached record highs in many states. Would you advocate a price control for oil so that you pay less than the market price at the pump? Why or why not? (Be sure to include your own research to support your answer.