Answer to Question #74464 in Economics for nazira

Question

Industry researchers R.S. Platou predicted that, between 2016–17, oil prices would fall by
5%, production of oil by OPEC and the former Soviet Union would increase, and
deliveries of new tankers would exceed scrappage of older vessels. (Source: Platou
Report , www.platou.com).
a. Using suitable diagrams, explain how each of the following would affect the market
for tanker services: (i) a fall in oil prices; (ii) an increase in production by OPEC and
the former Soviet Union; (iii) new tanker deliveries; and (iv) scrappage of older
vessels.
b. Suppose that the net effect is to increase tanker rates. Illustrate the net effect on a
single diagram. Explain the impact on the quantity of tanker services used.

Answer 1

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