If the expected price of oil rises then

Question

Quizplus · Accepted Answer

If the expected price of oil rises, there will be a shift in the supply and demand curves for oil. As the demand for oil is relatively inelastic, the increase in the price of oil will lead to a decrease in the quantity demanded, resulting in a movement up the demand curve. On the other hand, the increase in expected prices will encourage suppliers to increase their output of oil, which means a shift along the supply curve to the right. The net effect of these two changes will be a rise in the equilibrium price, but the change in the equilibrium quantity will depend on whether the demand change outweighs the supply change. Therefore, option D is the correct choice.

If the Expected Price of Oil Rises Then