Scenario 2 The release of a new range of cheap electric cars causes a fall in the demand for oil. We start at the equilibrium point ‘A’. When the new electric cars are released a large number of people switch from petrol and diesel cars to electric cars. This causes the demand curve for oil to shift to the left. This fall in demand causes a reduction in the quantity demanded of oil and will lead to a reduction in price as oil suppliers try to attract customers. These adjustments continue until we reach a new equilibrium, at point ‘B’. At this point less oil is sold at a lower price.
P A
P1 P2
B D D1 Q2 Q1 Q
Scenario 3 The discovery of a major new oilfield in the North Sea causes an increase in supply. We start at the equilibrium point ‘A’. The discovery of a new oilfield increases the quantity supplied of oil and shifts the supply curve to the right. This increase in supply leads to a fall in price and an increase in demand. These adjustments continue until the equilibrium, point ‘B’, is reached. At this point more oil is sold at a lower price.
