Imported oil gets cheaper.Instructions: Grab either the AD or AS curve and drag and drop it to a new position to represent the resulting shift in AD or AS.
Question
Imported oil gets cheaper.
Instructions: Grab either the AD or AS curve and drag and drop it to a new position to represent the resulting shift in AD or AS.
Solution
When imported oil gets cheaper, it reduces the cost of production for goods and services that use oil as an input. This leads to an increase in the supply of these goods and services, which is represented by a rightward shift in the Aggregate Supply (AS) curve.
Here are the steps to represent this in a graph:
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Identify the current position of the AS curve on your graph. This curve represents the total supply of goods and services produced by a country at different price levels.
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Click and hold the AS curve.
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Drag the AS curve to the right to represent an increase in aggregate supply. The distance you move the curve represents the magnitude of the change in supply.
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Release the AS curve in its new position.
Remember, a rightward shift in the AS curve represents an increase in supply, which is caused by factors that increase productivity or reduce costs of production, such as a decrease in the price of imported oil.
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