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In: Economics

Show the effects of each of the following events on the market in the petroleum engineering...

Show the effects of each of the following events on the market in the petroleum engineering industry: a. More people switch from gasoline powered cars to electric cars. b. Fewer college students major in petroleum engineering. c. New technologies and improvements in computer modeling expand the toolbox of petroleum engineers.

Solutions

Expert Solution

a) If people are switching from gasoline powered cars to electric cars, demand for the former will decline. Then, demand for workers engaged in the production of these cars will also decline. Hence we expect the demand curve in petroleum engineering industry would decrease. This reduces the equilibrium price and quantity

b) If only fewer students are able to do petroleum engineering, we have fewer petroleum engineers and so the supply would decrease. This would raise the equilibrium price and reduce the quantity

c) New technology will increase labor productivity and hence, the supply would increase. This would raise the equilibrium quantity and reduce the price.

Rahul Sunny answered 2 years ago
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