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Homework answers / question archive / After several years of slow economic growth, world demand for petroleum began to rise rapidly in the 1990s
After several years of slow economic growth, world demand for petroleum began to rise rapidly in the 1990s. Much of the increase in demand was met by additional supplies from sources outside OPEC. OPEC during this time was unable to restrain output among members in its effort to lift oil prices. What best describes these events?
A.The rise in demand shifted the demand for oil to the right. As price rose, quantity of oil supplied rose.
B.The rise in demand reflects a movement down along the demand curve as supply shifted to the right when suppliers produced more oil.
C.The rise in demand shifted the demand for oil to the right. OPEC actions shifted the demand for oil back to the left.
D.The rise in demand shifted the demand for oil to the right. As price rose, supply of oil also rose.
The correct answer is D. The demand for oil shifted to the right (i.e. more oil was demanded at every price level). The rise in demand led to an increase in the price, which incentivized an increase in supply. The increase in supply was possible since OPEC was not able to restrict production among its members, while non-OPEC members increased their supply. In the graph below, this is illustrated by the movement from A to B.
