true or false The price of oil is decreasing in the international oil markets. We should...

true or false The price of oil is decreasing in the international oil markets. We should expect that the demand for cars will shift to the left. and Explain why?

Expert Solution

Answer.

Oil and Cars are complementary goods. complementary goods are those goods which increase in the price of a good reduces the demand for its comlement and decrease in the price of a commodity increases the demand for its complement. When the price of oil is decreasing in the international oil markets. The demand for cars increases. This can be sjown in the followinf figure;

In the above figure, x-axis shows quantity and y-axis shows price. D is the demand curve and S is the supply curve. As the result of the price of oil is decreasing in the international oil markets, the demand for cars increases, the demand curve shift to the right. The price increases from p to p1 and quantity aso increases from q to q1.

Rahul Sunny answered 3 years ago

The price of oil in international markets has dropped stunningly 60% in the past twelve months....

The price of oil in international markets has dropped stunningly 60% in the past twelve months. Among the factors mentioned behind this drastic fall is the millions of barrels of oil produced in the US called shale oil. Look at the supply and demand picture for this commodity and try to analyze its price action. Discuss the impact of price elasticity of supply and demand in the short and long terms. Should be in 3-4 pages thanks

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