66. __________. Demand theory is based on a simply
generalization about customer behavior that has been observed for centuries,
that almost people would regard as "common sense". Generally speaking, if a good
or service becomes more expensive, consumers are less likely to buy it. So, the
price of oil more than doubled in 1999, the demand for oil would fall. How much
did the demand for oil fall would depend on the elasticity of the demand for
oil. Economists describe the demand for oil response as relatively inelastic.
So, the fall was not large. 67. __________. A substantial
rise in the price of oil would affect the demand for oil tankers and coal in
1999. 68. __________. The use of coal is the same as oil.
When file price of oil rises, fewer people will use oil and more people will use
coal. In Economics, coal is a substitute good of oil, the price of oil rises,
and the demand for oil falls, the demand for coal increases. As the demand for
coal is related to the demand for oil, therefore, a constriction in the demand
for oil will mean that the demand for coal will shift to a rise. The increase in
demand is shown by demand rising from oil to coal. So, the demand for coal
increased in 1999. 69. __________. Because the price of oil
rose in 1999, refiner had to face a squeeze on profit margins. This made the
costs of refining petrol increase. The costs of production increase will lead
decrease on the supply for petrol. As the supply for petrol is related to the
supply for oil, therefore, an extension in the supply for oil will mean that the
supply for petrol will shift to a fall. This decrease in supply is shown by
supply falling from Qs0 to Qs1 So, the supply for petrol
decreased in 1999. 70. __________. Because the price of oil
rose in 1999, the supply for oil would raise. Nylon is joint of oil. So, the
supply for oil raises the supply for nylon increases. As the supply for nylon is
related to the supply for oil, therefore, an extension in the supply for oil
will mean that the supply for nylon will shift to a rise. So the supply for
nylon increased in 1999. A. The graph shows how the crude oil price has
changed between 1994 and 1998. In general, the crude oil price rose up to the
peak until 1997, at which point there was a sharp reduction in the crude oil
price. Finally, we can summarize that the overall price, if crude oil dropped
from over＄10 per barrel to almost ＄7 per barrel between 1994 and 1998. Market
forces affected this. B. In 1999 the price of oil more than doubled. Discuss
the effects of a substantial rise in the price of oil on the supply and demand
for oil and other related products. This affected not only the demand and supply
for oil, but also other related products. C. Because the price of oil
rose in 1999, producing oil could get more profit. Therefore, some producers
would switch from providing nuclear power to providing oil. This meant that more
producers would produce oil. Oil becomes more attractive than nuclear power;
this will lead decrease on the supply for nuclear power. As the supply for
nuclear power is related to the supply for oil, therefore an extension in the
supply for oil will mean that the supply will shift to a fall. So, the supply
for nuclear power decreased in 1999. D. Supply theory tells us that
profit enable producers to use less suitable resources to increase their supply
of product. In 1999, the price of oil more than doubled, this meant that the oil
producers could get more profit, so the supply would rise. This type of movement
is known as an extension which leads to supply rising. How much did the supply
for oil raise would depend on the elasticity of the supply for oil. The rule is
that the steeper the curve, the more elastic the supply and vice versa. So, the
supply for oil is elastic. E. A substantial rise in the price of oil
would affect the supply for nuclear power, petrol and nylon. F. We know
that oil tankers are used to transport oil. If the price of oil rises, fewer
people buy oil. Therefore, less oil tankers are used to transport oil. In
Economics, oil tankers are complementary goods of oil, the price of oil rises,
and the demand for oil falls, the demand for oil tankers decrease. As the demand
for oil tankers is related to the demand for oil, therefore, a constriction in
the demand for oil will mean that the demand for oil tankers will shift to a
fall. So the demand for oil tankers decreased in 1999.