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saveliy_v [14]
3 years ago
8

In the market for crude oil, if the change in demand due to the falling price of natural gas (a substitute for oil) is greater t

han the change in supply due to disruptions in oil-well operations in the Middle East, then the equilibrium price of oil will decrease.True /false
Business
1 answer:
murzikaleks [220]3 years ago
8 0

Answer:

True

Explanation:

The effects of both changes on price is as follows:

1. The Greater Effect - change in demand due to the falling price of natural gas (a substitute for oil)

As price of natural gas, a substitute for oil, falls, demand for oil will fall pushing oil producers to respond by cutting crude oil prices in a bid to sustain demand and prevent its fall. <em>Thus, the effect is a price fall</em>.

2. The Lesser Effect - change in supply due to disruptions in oil-well operations in the Middle East

Due to supply disruptions which will result is a reduction in supply, the price of oil will tend to increase as consumers buy more of a commodity in less supply. <em>Thus, the effect on price is a rise</em>.

There, since the greater effect is a price fall, and the lesser effect is a price rise, equilibrium price is expected to fall.

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Answer:

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