Question-1 : Suppose that you have been hired as an Economic Analyst by OPEC and
ID: 1192029 • Letter: Q
Question
Question-1: Suppose that you have been hired as an Economic Analyst by OPEC and given the following schedule showing the world demand and supply for oil:
Price (P) ($/barrel)
Quantity Demanded (Qd)
(millions of barrels/day)
Quantity Supplied (QS)
(millions of barrels/day)
10
60
20
20
50
30
30
40
40
40
30
50
50
20
60
Answer the following questions:
1- At what price, the oil market will be in equilibrium situation?
2- If OPEC produces 50 million of barrels/day, calculate its Total Revenue (TR)?
3- If the price of oil rises from $40 to $50 per barrel, what will be the Total Revenue (TR) from oil sales? Also mention either TR will increase or decrease?
4- When the price changes from $30/barrel to $40/barrel, calculate Price Elasticity of Demand (Ed)?
5- When the price changes from $30/barrel to $40/barrel, calculate Price Elasticity of Supply (Es)?
Price (P) ($/barrel)
Quantity Demanded (Qd)
(millions of barrels/day)
Quantity Supplied (QS)
(millions of barrels/day)
10
60
20
20
50
30
30
40
40
40
30
50
50
20
60
Explanation / Answer
1. at price = $30 as demand = supply
2. TR = DEMAND * PRICE = 30*40 = 1200
3. TR= 50*20 =1000 , decrease
4. Ed = (30-40)/40 / (40-30)/30 = 25% / 33.33% = 0.75
5. Es= (50-40)/40 / (40-30)/30 = 25% / 33.33% = 0.75
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.