Question

In retaliation for U.S. support for Israel during the Arab-Israeli War, OPEC countries stopped selling oil to the United States. For the United States, this embargo caused the
a. demand curve for oil to shift in.
b. demand curve for oil to shift out.
c. supply curve of oil to shift in.
d. supply curve of oil to shift out.

Answer 1

For the United States, this embargo caused the c) supply curve of oil to shift in. The OPEC countries' embargo of oil decreased the supply quantity of oil in the United States with the same price. The law of supply describes that a decreasing in quantity will cause a decreasing in price, however, this embargo made changes in the quantity of oil but no changes in the price of oil which result in a shift of the supply curve of oil.