In early 2008, the price of oil on the world market increased, hitting a peak of about $140 per barrel in July, 2008. In the second half of 2008, the price of oil declined, ending the year at just over $40 per barrel. Suppose that the global market for oil can be described by an upward-sloping supply curve and a downward-sloping demand curve. For each of the following scenarios, illustrate graphically how the exogenous event contributed to a rise or a decline in the price of oil in 2008:
a. A booming economy in China raised the global demand for oil to record levels in 2008.
b. As a result of the financial crisis of 2008, the U.S. and other developed economies plunged into a severe recession in the latter half of 2008.
c. Reduced sectarian violence in Iraq in 2008 enabled Iraq to increase its oil production capacity.