In the market for crude oil, if the change in demand due to falling price of natural gas (a substitute for oil) is greater than the change in supply due to disruptions in oil-well operations in the Middle East, then the equilibrium price of oil will decrease.

Question

Quizplus · Accepted Answer

According to the law of demand, if the price of a substitute product falls, the demand for the original product will decrease. Therefore, if the price of natural gas falls, the demand for crude oil may decrease. On the other hand, disruptions in oil-well operations in the Middle East will decrease the supply of crude oil. However, if the decrease in demand is greater than the decrease in supply, the equilibrium price of crude oil will decrease.

In the Market for Crude Oil, If the Change in Demand