Evaluate the impact of a fall in the price of oil on the market for diesel cars

3 sections:Analysis: what happens to supply/demand as a result?Application: in detail, what drives these changes in supply/demandEvaluation: how likely are these effects? are there any time lags? what factors decrease or increase the effects?
Supply-side effectsReduction in price of factor inputs (state them clearly, e.g. plastics used in cars, cost of running machinery)Supply shifts outwards: more cars provided at the given priceIncreased Q, decreased P
Demand-side effectsReduction in cost of complement (state it clearly, e.g. diesel or petrol): more affordableDemand shifts outwards: more cars demanded at the given priceIncreased Q, increased P
EvaluationWhich effect is larger? Quantity definitely increased, but will price increase or decrease?What if the oil price decrease is only for one quarter?What could the macro effects?

Answered by Hugh B. Economics tutor

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