Economic Case Study: Impact of Petrol Prices on Equilibrium Price and Quantity of Motor Cars

Running head: ECONOMIC CASE STUDY
ECONOMIC CASE STUDY
Name of the Student
Name of the University
Author’s Note

1ECONOMIC CASE STUDY
Table of Contents
Introduction................................................................................................................................2
Scenario One..............................................................................................................................2
Scenario Two.............................................................................................................................6
Conclusion..................................................................................................................................9
References................................................................................................................................10

2ECONOMIC CASE STUDY
Introduction
The purpose of this assessment is to analyse economic principles and models. The
decision making by individuals, enterprise and government is evaluated by using economic
concepts and knowledge. The economic outcomes in market and its impact by the market
structure and macroeconomic environment is described in this study. This assessment focuses
on two scenarios. The first scenario highlights on how increase in petrol prices impact the
equilibrium price and equilibrium quantity for motor cars. This scenario is explained with the
help of competitive market theory. The second scenario explains about the price elasticity of
demand for petrol.
Scenario One
1)a) Recent studies reflect that the Australian petrol prices are at highest level for the last
three years. The petrol prices increased at highest level since the year 2015 owing to
increasing geopolitical tensions and supply cuts from OPEC and non- OPEC producers (Hall
and Lieberman 2012). An imaginary demand and supply curves for motor cars in 2015 before
the increase in petrol prices are shown below-

3ECONOMIC CASE STUDY
Quantity
Price S
S
D
D
Q*
P*
E
Figure 1: Imaginary demand and supply curve for motor cars
Source: (As created by author)
The above figure reflects that equilibrium occurs at the point E where demand curve (DD)
and supply curve (SS) intersects each other. The corresponding equilibrium price of cars is
P* and equilibrium quantity of cars is Q*.
b) The change in equilibrium price and quantity for motor cars is illustrated below-