Question

13. If the supply of gasoline rises, name a substitute that will increase in demand? 14. How do you think each of the following affected the world price of oil? List if it will effect supply or demand, and the price change if any. Use basic supply and demand analysis. a. Tax credits were offered for expenditures on home insulation. b. The Alaskan oil pipeline was completed. c. Oil was discovered in Mexico and the North Sea. d. Sport Utility Vehicles and minivans became popular. e. Natural oil reserves became depleted​

Answer 1

13. If the supply of gasoline rises, a substitute that may increase in demand could be electric or hybrid vehicles.

14. Here is how each of the following events may have affected the world price of oil using basic supply and demand analysis:

a. Tax credits offered for expenditures on home insulation would likely decrease the demand for oil as people would use less energy to heat their homes. This would lead to a decrease in the price of oil.

b. The completion of the Alaskan oil pipeline would increase the supply of oil, leading to a decrease in the price of oil.

c. The discovery of oil in Mexico and the North Sea would increase the supply of oil, leading to a decrease in the price of oil.

d. The popularity of Sport Utility Vehicles and minivans would increase the demand for oil as these vehicles typically consume more gasoline than smaller cars. This would lead to an increase in the price of oil.

e. The depletion of natural oil reserves would decrease the supply of oil, leading to an increase in the price of oil.