demand for gasoline and thus oil. Since the demand curve is shifting down the supply curve, the

equilibrium price and quantity both fall.

b. Cold weather increases the need for heating oil. This causes a rightward shift in the demand for

heating oil and thus oil. Since the demand curve is shifting up the supply curve, the equilibrium price

and quantity both rise.

c. A discovery of new oil will make oil more abundant. This can be shown as a rightward shift in the

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supply curve, which will cause a decrease in the equilibrium price along with an increase in the

equilibrium quantity. (The supply curve shifts down the demand curve so price and quantity follow

the law of demand. If price goes down, then the quantity goes up.)

d. When an economy slows down, it produces less output and demands less input, including energy,

which is used in the production of virtually everything. A decrease in demand for energy will be
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