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Question: 4 understanding changes in equillbrium price and quantity aa aa...

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4. Understanding changes In equillbrium 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 oll 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 oll include the cost of crude ail and the cost of refining crude olil Into home heating oll. Use the calculator to help you answer the following questions. You will not be graded on any changes y the calculator. ou make to r mouse to drag the green line on the graph. The values in the boxes on the right side of the Tool tip: Use you calculator will change accordingly. You can also directly change the values in the boxes with the white background b clicking in the box and typing. When you cdick the Calculate button, the graph and any related values will change accordingly. PRICE (Dollars per barrel) EQUILIBRIUM CALCULATOR: MARKET FOR HEATING OIL 80 70 60 50 40 + 30 Price of Heating Oil30 (Dollars per barrel Quantity Demanded 100 Quantity Supplied 60 Thousands of barrels/dayl Shortage Thousands of barrels/dayl DEMAND SHIFTERS Thousands of barrels/day (Thousands of barrels/day SUPPLY SHIFTERS 40 Surplus Price of Natural Gas 10 Cost of Crude Oi 25 Dollars per 1,000 cubic ft.l (Per barrel of heating oill 20 Price of an Oil Furnace (Dollars per furnacel 2000 Cost of Refining Oi Per barrel of heating oill 10 Average Annual Income Thousands of dollars 40 0 20 40 60 80 100 120 140 160 QUANTITY IThousands of barrels) Reset to Initial Values Calculate
/quiz?ctx-gmcdonne-00748quiz action-takeQuiz&quiz probGuid action-takeQuiz&quiz probGuid-ONAPCOA80 10100000048896fe00700008ck-m 154854980287 accordingly. PRICE [Dollars per barrel) EQUILIBRIUM CALCULATOR MARKET FOR HEATING OIL Price of Heating OIl Dollers per barrel Quantity Demanded Thousands of barrels/dayl Shortage B0 70 60 50 40 30 20 10 30 Quantity Supplied Thousands of barrels/dayl 60 40 Surplus ITheusands of barrels/deyl Thousands of barrels/day DEMAND SHIFTERS SUPPLY SHIFTERS Cost of Crude Oil Price of an Oil Furnace 2000 Cost of Refining O Price of Natural Gas 1 25 (Dollars per 1,000 cubic ft) [Dollars per furnace) Average Annual Income Per barral of heating oil Per barrel of heating oil] 「 40 + -i-← | Thousands of dollars 0 20 40 60 80 100 120 140 160 QUANTITY IThousands of barrels) Suppose that all of the determinants of supply and demand for heating oll are equal to their initial values. (If youve 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. Suppose that the cost of crude oil Increases from $25 to $55 for each barrel of heating oil produced. Assuming that the rest of the determinants of supply and demand for heating oil remain equal to their initial values, the market will eventually reach a new equilibrium price ofM oil increases by $30, the price of heating oil increases by per barrel. While the cost of producing each barrel of heating per barrel. Reset the calculator to its initial values. Suppose that instead of an increase in the cost of producing heating oil, there was an increase in the price of natural gas from $10 to $20 per 1,000 cubic feet. If the price of heating oil were to remain at the initial equilibrium price you found in the first question, there would be of barrels of heating oil per day, which would exert pressure on prices
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