Part 1: Elasticity

Read Source 1 and 2 and answer the following questions:

Source 1- Opinion Piece

Opinion Piece: Best Potential Returns from Oil

Source 2- New technology

The new oil revolutions

1. What has happened to the price of crude oil in 2015? What has happened to the demand for crude oil in 2015? Is there an economic theory that supports this relationship? Support your answer with a diagram.

2. In the last 6 months of 2015 oil prices fell by 30% and oil demand has risen by 2%. Based on this data what type of price elasticity does oil demand have?

3. Do you agree with the opinion expressed in Source 1 on the price elasticity of demand? Why or why not?

4. Would you advise an oil producer to increase oil prices or decrease oil prices based on your analysis in previous questions? Explain and justify your answer with a diagram. (Hint: Think of Topic 4 tests)

5. Based on Source 2 how would the price elasticity of supply have changed since the introduction of shale oil production in 2008? Support your answer with economic theory.

Part 2: Market Forms and Production Costs

Read Source 1 and 2 and answer the following questions:

Source 1- Supermarkets Price War

Fruit, veg prices slashed in supermarket price war

Source 2- Supporting Diagrams

1. What type of market structure is the supermarket industry? Explain why with reference to Sources 1 and 2 and economic theory.

2. Is it in the interests of Woolworths and Coles to have a price discount war? Why? What would be a better strategy for Coles and Woolworths to take in regards to pricing? (Refer to the kinked demand curve and game theory in your answer.

3. What type of market structure is the market for vegetables provided by farmers? Explain why with reference to Sources 1 and 2 and economic theory.

4. How would falling prices for their products due to the price war affect the individual vegetable producer? Demonstrate your answer with reference to a diagram showing only an individual farmer's cost curves. Would small farmers be forced to leave the market in the long-run? Why?

5. If individual farmers made significant improvements in their technologies could they overcome the price rises and stay in business in the long-run? Support your answer by referring/adding to your diagram in 4 and thinking about costs.

Part 3: Referencing

5 Marks will be awarded for correct referencing (see assignment instructions at beginning of document)

Attachment:- Eco.pdf