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The following may cause either the demand curve for oil or the supply curve for oil to shift to the right or the left: - a new supply of oil is discovered off the coast of Ireland; - the level of indirect taxes on oil is reduced; - an increase in unemployment causes income levels to fall within the economy - Leaving Cert Economics - Question b - 2008
Question b
The following may cause either the demand curve for oil or the supply curve for oil to shift to the right or the left: - a new supply of oil is discovered off the c... show full transcript
Worked Solution & Example Answer:The following may cause either the demand curve for oil or the supply curve for oil to shift to the right or the left: - a new supply of oil is discovered off the coast of Ireland; - the level of indirect taxes on oil is reduced; - an increase in unemployment causes income levels to fall within the economy - Leaving Cert Economics - Question b - 2008
Step 1
a new supply of oil is discovered off the coast of Ireland;
Answer
The supply curve will shift.
Shift Direction: To the Right.
Explanation: As more oil becomes available on the market, the supply curve will shift to the right. This is because producers can now offer more oil at each price point, increasing overall supply.
Step 2
the level of indirect taxes on oil is reduced;
Answer
The demand curve will shift.
Shift Direction: To the Right.
Explanation: A reduction in indirect taxes on oil allows consumers to buy more oil, as the effective price decreases. This increased purchasing power leads to higher demand at each level of output.
Step 3
an increase in unemployment causes income levels to fall within the economy.
Answer
The demand curve will shift.
Shift Direction: To the Left.
Explanation: An increase in unemployment results in lower income levels, leading consumers to have less disposable income. Consequently, this reduction in income causes a decrease in consumer spending, shifting the demand curve to the left.