Question

What would happen to the equilibrium price and quantity of crude oil if Saudi Arabia increased its production of oil? describe and show with supply or demand diagram.

Answer 1

The above graph showing the Equilibrium price and quantity of crude oil in this example is assumed that Demand remains the constant.

Th initial equilibrium for quantity and price level is shown whre Deamdnd and Supply curve intersect at P1 and Q1. Now Supply increased but demand remains the same increasing the supply in the market the price falls P1 to P2and quantity increases Q1 to Q2 at new supply curve S2 interacting demand curve equilibrium achieved.