A temporary decrease in the price of oil would be considered a:
A) short-run supply shock.
B) long-run supply shock.
C) demand shock.
D) The changing price of oil would not affect any of these.

Question

Quizplus · Accepted Answer

A temporary decrease in the price of oil would be considered a short-run supply shock as it would affect the supply curve in the short term. This is because producers have already made production decisions based on the previous price of oil and would need time to adjust their output level to the new price. In the long run, however, producers would have more flexibility to adjust their production and the supply curve would shift back to its original position. A decrease in the price of oil would not be a demand shock as it does not affect the demand curve.

A Temporary Decrease in the Price of Oil Would Be