4. Understanding changes in equilibrium price and quantity Aa Aa Suppose you are

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4. Understanding changes in equilibrium price and quantity Aa Aa Suppose you are an analyst in the oil refinery industry and are responsible for estimating the equilibrium price and quantity of home heating oil. To do so, you must consider factors that can affect the supply of and demand for heating oil Determinants of the demand for heating oil include household income, the price of an oil furnace (a complement to heating oil), and the price of natural gas (a substitute for heating oil). Determinants of the supply of heating oil include the cost of crude oil and the cost of refining crude oil into home heating oil Use the calculator to help you answer the following questions. You will not be graded on any changes you make to the calculator Tool tip: Use your mouse to drag the green line on the graph. The values in the boxes on the right side of the calculator will change accordingly. You can also directly change the values in the boxes with the white background by clicking in the box and typing. When you click the Calculate button, the graph and any related values will change accordingly EQUILIBRIUM CALCULATOR: MARKET FOR HEATING OIL PRICE (Dollars per barrel] 80 Price of Heating Oil Dollars per barrel 30 70 Quantity Demanded 100 Quantity Supplied 60 Thousands of barrels/dayl Shortage Thousands of barrels/dayl 60 Thousands of barrels/dayl Surplus 50 40 Thousands of barrels/dayl SUPPLY SHIFTERS Cost of Crude Oil DEMAND SHIFTERS 30 Price of Natural Gas [Dollars per 1,000 cubic ft.] Price of an Oil Furnace [Dollars per furnace] Average Annual Income [Thousands of dollars 10 25 Per barrel of heating oil] 20 2000 Cost of Refining Oil [Per barrel of heating oil] 10 40 20 40 60 80 100 120 140 160 QUANTITY |Thousands of barrels) Reset to Initial Values Calculate Suppose that all of the determinants of supply and demand for heating oil are equal to their initial values. (If you've changed any of them, click the Reset to Initial Values button.) The equilibrium quantity in this market is barrels of heating oil per day, and the equilibrium price is per barrel

Explanation / Answer

Answer:

1. Correct option: (b) a shift in the supply curve of wine

Reason: Movement along demand curve occurs only with change in price of good.

With a shift of supply curve of wine, price will change, which will lead to a movement along demand curve because of change in quantity demanded

2. Correct option: (b) change in number of consumers (c) change in consumer income

Reason: A change in number of consumers and income will shift demand curve to left or right, thereby changing demand of wine. A change in price of wine will cause movement along demand curve, not shift.

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