Question

Part - III Now because of COVID-19, the lockdown makes this industry highly shattered, Less movement of vehicle, less or no manufacturing sectors apart from few commodity, all these creates again a big dilemma in this industry. Question: 10 Show how the equilibrium price will change in oil industries the in relation to the fluctuation of prices

Answer 1

Ans. With lockdowns all over the world, there are very less vehicles on the road. Also, countries are not operating airplanes as 80% of all the airplanes are grounded and the industries are not operating or operating partially. So, demand for oil is falling which lead to a decrease in demand for oil shifting the demand for oil to the left from D to D’ which will lead to a decrease in price of oil from P to P’ and this decrease in price will lead to a decrease in quantity supplied decreasing the equilibrium quantity of output to Q’ from Q.

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