Explain The Likely Effect On Price And Quantity Of A Rise In Demand

1. Investigate what has happened to the oil price since 2008

At the start of 2008, oil prices doubled compared to 2007, before drastically falling. In 2007, world oil prices were $64 per barrel, and in the summer of 2008, they rose up to $175 per barrel- an extremely high peak. By the end of the year, though, the oil price fell to 44$ per barrel. In 1979, it took seven years to fall this much, while in 2008-2009, it took only six months. This was the biggest drop in oil prices in history. During all of 2009, the oil prices remained low. From 2010 to 2013, they were relatively high. In June 2014, the oil prices per barrel dropped by one half. The low oil prices per barrel were similar to the ones during the year of 2009. In December 2014,

Explain the likely effect on price and quantity of a rise in demand or fall in supply

In a supply and demand diagram, at equilibrium point there is never an oversupply or an insufficiency of products. Market Equilibrium is when supply equals demand. It is of course an assumption, because it is very unlikely that supply will be exactly equal to demand in real-life situations.

A Rise in Demand

Demand rise means that more people wish to buy a good or service at a specific price. This produces a change in price as well as quantity. If demand increases, and production is the same, then prices will increase, so that some people cannot afford that something anymore. In a demand and supply diagram, a rise in demand will cause price to shift upwards and the volume to the right. It will also result in a higher equilibrium price and quantity. This situation is illustrated in the diagram below:

Shifts in demand are caused by a variety of elements, mostly joined to consumer behavior and conditions. These changes in demand are regulated by economic factors: mean spending per person based on their income, cultural variations, climate change and progresses in science.

A Fall in

It is among the worst striked of the OPEC members. Due to its incompetent industry and government volatility, industry specialists predict that Venezuela will use up its money and not have enough for the coming year. Venezuela depends on oil revenue to pay for commodities including foods and services. The supply of everyday materials may decrease not enough money is circulating in the economy. Venezuela is currently going through a financial crisis that has resulted in a critical decrease in its monetary reserve. This may cause a social turmoil and disruption inside the country. Alejandro Grisanti, captain of the Barclays Latin America economic research team, quoted, “ If prices remain at current levels, Venezuela will see its cash flows reduced by $16 billion in the next 12 months”

For a government that has terrible economic strategies, this decrease in revenue will cause inflation to increase, meaning that prices of general goods and services will rise. Venezuelans will be able to buy and produce less. If oil prices do not recover in the next two years, Venezuela will definitely endure much worse than other OPEC