Final answer:
An increase in the cost of crude oil typically causes a leftward shift in the supply curve for plastic toys, leading to less supply at any given price and potentially increasing the price of plastic toys if demand remains unchanged.
Step-by-step explanation:
When the cost of crude oil increases by 25%, the production costs of plastic, being a derivative of petroleum, will likely increase as well. This added cost on the raw material can reduce the supply of plastic toys since producers may not be able or willing to produce at the same rate without raising prices, which could lead to decreased demand. Therefore, rather than a leftward shift in the demand curve, it would cause a leftward shift in the supply curve for plastic toys. The supply curve shifts to the left when producers supply less at a given price, potentially leading to a higher equilibrium price for plastic toys unless demand decreases simultaneously.
An example of a historical shift in the crude oil supply curve happened in 1973 when OPEC reduced oil exports, which led to a higher equilibrium price and lower quantity of oil in the market. Similarly, in the case of plastic toys, an increase in the cost of crude oil would shift the plastic toy supply curve to the left from So to S₁, indicating less supply at every price level. If the demand remains unchanged, this shift would tend to raise the price of plastic toys. Should an increase in demand for oil occur due to a new popular kind of plastic, this could also affect the equilibrium price and quantity of oil, leading to further complexities in the market dynamics affecting plastic toy production.