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Factors Affecting Future Supply of Raw Materials

Explain why the supply of a raw material such as oil may rise in the future.

Category:

Macroeconomic Factors and Policies

Frequently asked question

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Answer

Provide background information to set the context for your analysis.

Why the supply of a raw material such as oil may rise in the future:

New discoveries: Investment in exploration and technological advancements can lead to the discovery of new oil reserves. As companies invest in research and development, they may uncover previously unknown oil deposits or find more efficient ways to extract oil from existing sources. These discoveries expand the available supply of oil, contributing to an increase in its overall supply in the future.

Price incentive: When the price of oil rises, it creates a profit incentive for suppliers to increase their production. Higher prices make it more economically viable for oil producers to extract oil from more challenging or costly sources, such as deep-water drilling or unconventional reserves like shale oil. As the price of oil increases, it becomes more lucrative for suppliers to invest in expanding their production capacity or tapping into previously uneconomical sources, thereby boosting the supply of oil.

Additionally, it's worth noting that advances in technology and reductions in production costs can also contribute to an increase in the supply of oil. Technological advancements in extraction techniques, such as hydraulic fracturing (fracking) or enhanced oil recovery methods, can make it more efficient and cost-effective to extract oil from reserves. Moreover, cuts in wages or improvements in labor productivity can reduce production costs, making oil extraction more profitable and encouraging increased supply.

Furthermore, government subsidies or incentives can also play a role in boosting oil supply. Governments may provide financial support or offer favorable conditions to oil companies to encourage exploration, production, and investment in the industry. These subsidies can provide additional resources and incentives for oil suppliers to increase their output and contribute to the overall supply of oil.
Overall, new discoveries, price incentives, advances in technology, cost reductions, and government support can all contribute to a potential rise in the supply of a raw material like oil in the future.

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I. 🍃Introduction
- Definition of economics
- Importance of understanding supply and demand

II. Factors affecting supply
- New supplies discovered through investment
- Price incentives for suppliers
- Technological advances and wage cuts reducing costs
- Government subsidies

III. Impact on market equilibrium
- Increase in supply leading to lower prices
- Decrease in supply leading to higher prices
- Shifts in supply curve affecting equilibrium price and quantity

IV. Examples of supply and demand in action
- Oil industry
- Agriculture
- Technology

V. 👉Conclusion
- Recap of factors affecting supply
- Importance of understanding supply for economic decision-making

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• New supplies may be discovered - after investment searching for them -
• Price may rise - giving suppliers a profit incentive to supply more -
• Advances in technology / cuts in wages - may reduce costs of obtaining the raw material -
• Government subsidies - providing finance to search for oil / greater incentive to increase output -

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