Problem 1:
Examine the following variables that could affect the price of oil:
a. Tax credits were offered for expenditures on home insulation.
b. The Alaskan pipeline was completed.
c. A supposed ceiling on the price of oil was removed.
d. A new, very large deposit of oil was discovered.
e. Buyers in large numbers all of the sudden started driving large sport utility vehicles.
f. The use of nuclear power suddenly decreased.
Choose any two of the above variables, and describe how your selections would affect oil prices based on the supply and demand analysis.
Problem 2:
Trace through the circular flow model. What is the point of the circular flow model, what are some leakages and injections into the circular flow model, and how are the leakages and injections related to the circular flow?
