To explain the operation of OPEC in term of demand and supply model.

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Answer 1

Question

Chapter 1A.5, Problem 1TTA

To determine

To explain the operation of OPEC in term of demand and supply model.

Expert Solution & Answer

Explanation of Solution

The following figure shows the effects on supply and demand:

MINDTAP: INTERMEDIATE MINCROECON -ACCES, Chapter 1A.5, Problem 1TTA

In the case of the oil market, when supply decreases, the response depends on the time horizon. The operation of OPEC varies in the short-run and in the long run.

Fig A. shows that when the demand and supply is inelastic, then the shift in supply curve (S₁ to S₂) leads to a greater increase in price.

However, in the long run, when supply and demand is elastic, then shift in supply curve (S₁ to S₂) in fig b. leads to a small increase in price (P₁ to P₂). Thus, in the shortrun, the price increases to at a greater degree as compared to the long run.

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Suppose that the world price of oil is roughly $100.00 per barrel and that the world demand and total world supply of oil equal 34 billion barrels per year (bb/yr), with a competitive supply of 20 bb/yr and 14 bb/yr from OPEC. Statistical studies have shown that the short−run price elasticity of demand for oil is −0.05, and the short−run competitive price elasticity of supply is 0.10. Using this information, derive linear demand and competitive supply curves for oil. Let the demand curve be of the general form Q=a−bP and the competitive supply curve be of the general form Q=c+dP, where a, b, c, and d are constants. The equation for the short−run demand curve is? The equation for the short−run competitive supply curve is

Answer 2

Question

Chapter 1A.5, Problem 1TTA

To determine

To explain the operation of OPEC in term of demand and supply model.

Expert Solution & Answer

Explanation of Solution

The following figure shows the effects on supply and demand:

MINDTAP: INTERMEDIATE MINCROECON -ACCES, Chapter 1A.5, Problem 1TTA

In the case of the oil market, when supply decreases, the response depends on the time horizon. The operation of OPEC varies in the short-run and in the long run.

Fig A. shows that when the demand and supply is inelastic, then the shift in supply curve (S₁ to S₂) leads to a greater increase in price.

However, in the long run, when supply and demand is elastic, then shift in supply curve (S₁ to S₂) in fig b. leads to a small increase in price (P₁ to P₂). Thus, in the shortrun, the price increases to at a greater degree as compared to the long run.

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Answer 3

Question

Chapter 1A.5, Problem 1TTA

To determine

To explain the operation of OPEC in term of demand and supply model.

Expert Solution & Answer

Explanation of Solution

The following figure shows the effects on supply and demand:

MINDTAP: INTERMEDIATE MINCROECON -ACCES, Chapter 1A.5, Problem 1TTA

In the case of the oil market, when supply decreases, the response depends on the time horizon. The operation of OPEC varies in the short-run and in the long run.

Fig A. shows that when the demand and supply is inelastic, then the shift in supply curve (S₁ to S₂) leads to a greater increase in price.

However, in the long run, when supply and demand is elastic, then shift in supply curve (S₁ to S₂) in fig b. leads to a small increase in price (P₁ to P₂). Thus, in the shortrun, the price increases to at a greater degree as compared to the long run.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 1A.5, Problem 1TTA

To determine

To explain the operation of OPEC in term of demand and supply model.

Expert Solution & Answer

Explanation of Solution

The following figure shows the effects on supply and demand:

MINDTAP: INTERMEDIATE MINCROECON -ACCES, Chapter 1A.5, Problem 1TTA

In the case of the oil market, when supply decreases, the response depends on the time horizon. The operation of OPEC varies in the short-run and in the long run.

Fig A. shows that when the demand and supply is inelastic, then the shift in supply curve (S₁ to S₂) leads to a greater increase in price.

However, in the long run, when supply and demand is elastic, then shift in supply curve (S₁ to S₂) in fig b. leads to a small increase in price (P₁ to P₂). Thus, in the shortrun, the price increases to at a greater degree as compared to the long run.

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Answer 5

Chapter 1A.5, Problem 1TTA

To determine

To explain the operation of OPEC in term of demand and supply model.

Expert Solution & Answer

Explanation of Solution

The following figure shows the effects on supply and demand:

MINDTAP: INTERMEDIATE MINCROECON -ACCES, Chapter 1A.5, Problem 1TTA

In the case of the oil market, when supply decreases, the response depends on the time horizon. The operation of OPEC varies in the short-run and in the long run.

Fig A. shows that when the demand and supply is inelastic, then the shift in supply curve (S₁ to S₂) leads to a greater increase in price.

However, in the long run, when supply and demand is elastic, then shift in supply curve (S₁ to S₂) in fig b. leads to a small increase in price (P₁ to P₂). Thus, in the shortrun, the price increases to at a greater degree as compared to the long run.

Answer 6

Chapter 1A.5, Problem 1TTA

To determine

To explain the operation of OPEC in term of demand and supply model.

Expert Solution & Answer

Explanation of Solution

The following figure shows the effects on supply and demand:

MINDTAP: INTERMEDIATE MINCROECON -ACCES, Chapter 1A.5, Problem 1TTA

In the case of the oil market, when supply decreases, the response depends on the time horizon. The operation of OPEC varies in the short-run and in the long run.

Fig A. shows that when the demand and supply is inelastic, then the shift in supply curve (S₁ to S₂) leads to a greater increase in price.

However, in the long run, when supply and demand is elastic, then shift in supply curve (S₁ to S₂) in fig b. leads to a small increase in price (P₁ to P₂). Thus, in the shortrun, the price increases to at a greater degree as compared to the long run.

Answer 7

Chapter 1A.5, Problem 1TTA

To determine

To explain the operation of OPEC in term of demand and supply model.

Answer 8

Expert Solution & Answer

Explanation of Solution

The following figure shows the effects on supply and demand:

MINDTAP: INTERMEDIATE MINCROECON -ACCES, Chapter 1A.5, Problem 1TTA

In the case of the oil market, when supply decreases, the response depends on the time horizon. The operation of OPEC varies in the short-run and in the long run.

Fig A. shows that when the demand and supply is inelastic, then the shift in supply curve (S₁ to S₂) leads to a greater increase in price.

However, in the long run, when supply and demand is elastic, then shift in supply curve (S₁ to S₂) in fig b. leads to a small increase in price (P₁ to P₂). Thus, in the shortrun, the price increases to at a greater degree as compared to the long run.