OPEC announced its forecast for world oil demand growth next year to 2.46 million barrels per day (bpd), up 20,000 bpd from the previous forecast. In the meantime, OPEC decided to cut their supply by 5% next year.
Please use demand and supply graph to illustrate the impact each of the following would have on demand or supply and oil prices. Also show how equilibrium price and equilibrium quantity would change. Please show the effect of two events at the same time on one diagram.
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Ответ:
The impact of OPEC's forecast for world oil demand growth and their decision to cut supply can be illustrated on a demand and supply graph.
1. OPEC's forecast for world oil demand growth:
- This would shift the demand curve to the right, indicating an increase in demand for oil.
- As a result, equilibrium price and equilibrium quantity would both increase.
2. OPEC's decision to cut supply:
- This would shift the supply curve to the left, indicating a decrease in supply of oil.
- As a result, equilibrium price would increase, and equilibrium quantity would decrease.
When both events are combined:
- The demand curve would shift to the right due to the forecasted increase in demand.
- The supply curve would shift to the left due to the planned supply cut.
- The equilibrium price would increase significantly, as both events contribute to a decrease in supply and an increase in demand.
- The equilibrium quantity would decrease, as the supply cut outweighs the increase in demand.
Overall, the combined effect of OPEC's forecast for world oil demand growth and their decision to cut supply would result in higher oil prices and a lower quantity of oil being supplied in the market.