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    Don't have any notes on this as I wasn't in the lesson when they were issued out, I've got a few points but really need some help on the following:

    What effect would a decrease in the costs of oil productions have on the supply of oil? (4)

    What other factors could affect the supply of oil? (8)

    Thank you so much!
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    1) Decrease in the costs of production would cause the supply of oil to go up as it would become more profitable.
    Let's say you can charge $100 per barrel and it costs you $40 to produce one unit. Your profit is $60. If the costs would go down to $20 you would get $80 of profit. It's only four marks so that could be enough, however you could add a graph showing a shift in the supply curve and say that, in theory, higher supply would push the price down.

    2) Think about external factors, war is a good example. Maybe mention alternative fuels (less demand for oil therefore less supply). OPEC changing their production quotas would also affect the supply.
 
 
 
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Updated: November 10, 2008
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