Question

A recent news story reported that the Organization of Petroleum Exporting Countries is expected to decrease the supply of oil next summer. Summer is traditionally a time of increased demand for oil because of vacation travel. What would be the combined effect of these two events on the summer market for gasoline?
a) an unpredictable change in the price and a decrease in the quantity
b) an unpredictable change in both the price and the quantity
c) an increase in the price and an unpredictable change in the quantity
d) an increase in the price and the quantity

Answer 1

Answer:

Option "C" is the answer.

Explanation:

Option "C" is the answer.

The decrease in the supply of oil will shift the supply curve leftwards. Similarly, the increases in the demand will shift the demand curve rightwards. The leftwards shift in the supply and rightward shift in the demand curve will result in an increase in price but the change in quantity can not be predicted because the magnitude of change will depend on the shift in the curves.