Assume that oil speculators buy oil and put it in storage.Shift one of the curves in the accompanying graph to showthe effect of this speculation and then place the equilibriumpoint, E, at the new equilibrium price and quantity.What is the new price?$Why is speculation advantageous for future consumption?O Speculation is not advantageous.Today's prices are higher than future prices.Future prices will be higher.O It tends to smooth prices over time.Price ($/barrel)1009590858075706560555045403530252015105005012Is4D34 5 6Quanity (millions of barrerls)78910

Demand: People's willingness and ability to purchase (depending on price, alternatives, income,…

Assume that oil speculators buy oil and put it in storage. Shift one of the curves in the accompanying graph to show the effect of this speculation and then place the equilibrium point, E, at the new equilibrium price and quantity. What is the new price? $ Why is speculation advantageous for future consumption? Speculation is not advantageous. Today's prices are higher than future prices. Future prices will be higher. O It tends to smooth prices over time. Price ($/barrel) 100 95 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 0 50 1 2 4 D 3 4 5 6 Quanity (millions of barrerls) 7 8 9 10

Assume that oil speculators buy oil and put it in storage. Shift one of the curves in the accompanying graph to show the effect of this speculation and then place the equilibrium point, E, at the new equilibrium price and quantity. What is the new price? $ Why is speculation advantageous for future consumption? Speculation is not advantageous. Today's prices are higher than future prices. Future prices will be higher. O It tends to smooth prices over time. Price ($/barrel) 100 95 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 0 50 1 2 4 D 3 4 5 6 Quanity (millions of barrerls) 7 8 9 10

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter4: Demand, Supply, And Market Equilibrium

Section: Chapter Questions

Problem 25P

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