- Explain would happen to the prices of shreddies potentially if there was a storm across the main wheat plantations globally. (4 Marks)
- Explain the effect of a war in Saudi Arabia on world Oil prices. (4 Marks)
Write your answers in the comments below and bring in a supply and demand diagram you have drawn to explain the first question.
Suleyman
ReplyDelete1) To begin with, the supply of shreddies will decrease. This is because the supply of wheat (what is needed for production of shreddies) will fall. As a result cost of wheat will increase due to having lower supply therefore the company selling shreddies will increase the price for the good to catch up with raising prices.
Overall prices will increase because the cost of using wheat to produce shreddies will increase. The reason why the business will increase prices is because it aims to make profit selling less units and also because the business aims to make up for the rising costs.
2) If a war occurs in Saudi Arabia there will be a huge impact on Oil prices.
Saudi Arabia's major exports would be oil, meaning they make most of the money from exporting oil. Therefore, if there would be a war the total cost of all damages made to the country such as, damage on military, infrastructure and roads would cause costs to dramatically increase; the country will need to increase its oil prices to try to make up for the high costs. As a result Saudi Arabia will increase its Oil prices, knowing it is an inelastic good (not very high chance of demand falling), to try to make up for the costs through the revenue received by exporting oil.
Due to the storm, the supply of the wheat will decrease leading to an increase in the prices of wheat . The shreddies bussiness will have increased cost and so in order to catch up with the increased cost , they will have to increase their revenue so that they would be able to maintain their profit.To increase their revenue, they will have to increase their cost . This may decrease the demand for shreddies
ReplyDeleteIf a war in Saudia Arabia occurs, the oil prices will increase. This is because, the war will definitely cause a lot of damage in the country and Saudi's costs will increase dramatically. Therefore in order to collect enough money to make up for all these costs, the prices of Oil will have to be increased. However this cannot have a large impact on demand as oil is a necesiity and is needed .
1. The storm should destroy the wheat plantations, decreasing the total supply of wheat. prices of wheat therefore increase meaning Shreddies' production costs increase which will force them to increase price in order to maintain their profit margins. this may cause decreased demand for Shreddies and may mean an increase in demand for substitute goods,like supermarket own brand cereals or yoghurt for example.
ReplyDelete2. A war in Saudi Arabia would mean Saudi oil exports would be put on hold, which would mean the majority of oil reserves is taken off the market. This decrease in supply of world oil will push prices up for existing oil, maybe leading to a decrease in world demand for oil and may invest in different energy sources or utilise their own reserves.
The other top oil countries like Qatar etc will increase their exports as demand for their oil may increase now.
Saudi may use their oil to rebuild their infastructure if any is damaged as a reult of the war.
Explain would happen to the prices of shreddies potentially if there was a storm across the main wheat plantations globally.
ReplyDeleteA storm accross the main wheat plantations would cause a shortage. This means that there would not be enough wheat (a factor of production of shreddies) to keep up with the demand of shreddies. Shreddies would now have to pay more for wheat. The price of Shreddies would now have to increase to compensate for the risen cost of production as one of their main ingredients prices have increased due to a natural disaster. Demand for Shreddies may decrease now as consumers switch to substitutes
Explain the effect of a war in Saudi Arabia on world Oil prices. (4 Marks)
Saudi is one of the worlds largest oil exporters and a war could potentially destroy oil rigs, and exporting would be put on hold as Saudi deals with a national crisis. The supply of oil would now be decreased and as oil is a necessity, prices would dramatically increase however, there will still be a demand for oil as it is fairly price inelastic. However, countries may put off building infrastructure and efficiently use their already existing supply of oil to avoid having to demand oil at the new increased price.