When analyzing the demand curve for fuel, it is essential to differentiate between factors that influence demand versus those that affect supply. The following effects can be outlined for each scenario:
a. An increase in the price of cars
- Effect on demand for fuel: This could decrease the demand for fuel. Higher car prices may discourage people from purchasing cars, which could lead to fewer cars on the road and, consequently, lower demand for fuel.
b. An increase in the proportion of the population owning cars
- Effect on demand for fuel: This would likely increase the demand for fuel. As more people own cars, there would be more vehicles needing fuel, leading to a shift of the demand curve to the right.
c. A rise in the transport cost of shipping oil
- Effect on demand for fuel: This primarily affects supply rather than demand. An increase in shipping costs can lead to higher prices for fuel, which can indirectly decrease the quantity demanded if the price rises significantly. Thus, while it doesn’t affect demand directly, it can lead to a movement along the demand curve as consumers respond to higher prices.
d. A growing concern for environmental issues by the general public
- Effect on demand for fuel: This could decrease the demand for fuel. As environmental awareness increases, consumers may choose to reduce their fuel consumption or shift to alternative energy sources (like electric vehicles), leading to a leftward shift in the demand curve for traditional fuel.
e. An increase in duty for diesel
- Effect on demand for fuel: This primarily affects supply by increasing the cost for suppliers, which may lead to higher prices for diesel fuel. If the price increases, the quantity demanded may decrease, causing a movement along the demand curve for diesel. However, it doesn't shift the demand curve itself.
f. A reduction in duty for petrol
- Effect on demand for fuel: Similar to (e), this affects supply by reducing the cost for suppliers, potentially leading to lower prices for petrol. If the price of petrol decreases, the quantity demanded would likely increase, resulting in a movement along the demand curve. Again, it doesn't shift the demand curve but changes the price effects on quantity demanded.
In summary:
- Factors a, b, d influence the demand for fuel directly.
- Factors c, e, f primarily impact supply and affect demand through pricing mechanisms.
1 answer