Many changes are affecting the market for oil. Predict how each of the following events will affect the equilibrium price and quantity in the market for oil. In each case, state how the event will affect the supply and demand diagram. Create a sketch of the diagram if necessary. a. Cars are becoming more fuel efficient, and therefore get more miles to the gallon. b. The winter is exceptionally cold. c. A major discovery of new oil is made off the coast of Norway. d. The economies of some major oil-using nations, like Japan, slow down. e. A war in the Middle East disrupts oil-pumping schedules. f. Landlords install additional insulation in buildings. g. The price of solar energy falls dramatically. h. Chemical companies invent a new, popular kind of plastic made from oil.

In short, the effects of the given events on the equilibrium price and quantity in the oil market are as follows: a. Fuel-efficient cars: Equilibrium price decreases, equilibrium quantity decreases (Demand curve shifts left). b. Exceptionally cold winter: Equilibrium price increases, equilibrium quantity increases (Demand curve shifts right). c. Major oil discovery: Equilibrium price decreases, equilibrium quantity increases (Supply curve shifts right). d. Economic slowdown: Equilibrium price decreases, equilibrium quantity decreases (Demand curve shifts left). e. Middle East war: Equilibrium price increases, equilibrium quantity decreases (Supply curve shifts left). f. Additional insulation: Equilibrium price decreases, equilibrium quantity decreases (Demand curve shifts left). g. Decline in solar energy price: Equilibrium price decreases, equilibrium quantity decreases (Demand curve shifts left). h. Invention of oil-based plastics: Equilibrium price increases, equilibrium quantity increases (Demand curve shifts right).