1. OPEC announces it will increase oil production by 20 percent. What is the effect on the price of oil? Demonstrate your answer graphically.
2. Draw hypothetical supply and demand curves for tea. Show how the equilibrium price and quantity will be affected by each of the following occurrences:
a. Bad weather wreaks havoc with the tea crop.
b. A medical report implying tea is bad for your health is published.
c. A technological innovation lowers the cost of producing tea. d. Consumers' income falls. (Assume tea is a normal good.)