Coursework in Economics Essay Example | Topics and Well Written Essays - 1250 words

Coursework in Economics - Essay Example given that the price remains constant, the demand curve may shift upwards or downward, some of the reasons why the demand curve shifts include a change in future price expectations, consumers may opt to purchase more today to avoid high prices in the future or purchase less to purchase at low prices in the future, (Hardwick (2002)). The following table shows an example of downward shift and upward shift in demand: From the above diagram assuming that demand curve 0 is the original demand curve, a downward shift in the demand curve will shift the demand curve to demand curve 1 while an upward shift will shift the demand curve to demand curve 2. A shift in supply curve occurs when the quantity supplied increases or decreases given that the price remains constant, the supply curve may shift upwards or downward, (Hardwick (2002)). The following table shows a downward and upward shift in supply: From the above diagram assuming that supply curve 0 is the original demand curve, a downward shift in the supply curve will shift the supply curve to supply curve 2 while an upward shift will shift the supply curve to supply curve 1. Own price elasticity of demand refers to the percentage change in quantity demanded when the price is increased by one percent. Therefore it is calculated by dividing the percentage change in the quantity demanded by the percentage change in price level. For a normal good own price elasticity of demand is negative. (Walter (2000)) Own price elasticity of supply refers to the percentage change in quantity supplied when the price is increased by one percent. Therefore it is calculated by dividing the percentage change in the quantity supplied by the percentage change in price level. (Walter (2000)) The price of oil is determined by the supply and the demand of oil in the world. Some of the major producers include Iran, Iraq and Kuwait. From the oil price chart it is evident that the fluctuations in oil prices has been as a result of war and