Suppose that you have been hired as an economic consultant by OPEC and given the following schedule showing the world demand and supply for oil.
|
Price ($/barrel)
|
Quantity Demanded
(millions of barrels/day)
|
Quantity Supplied (millions of barrels/day)
|
|
10
|
60
|
20
|
|
20
|
50
|
30
|
|
30
|
40
|
40
|
|
40
|
30
|
50
|
|
50
|
20
|
60
|
Your advice is needed on the following questions (use the diagram):
1- What is the price, quantity of supply and quantity of demand in equilibrium situation?
2- If the price raises from $20 to $30 a barrel, will the total revenue from oil sales increase or decrease?
3- What are the values of the price elasticity of booth demand and supply for price changes from $20 to $30 a barrel?
4- If the price of oil degrease from equilibrium price $30 to new price $20 then:
- What do we call the gap between the quantity demanded and quantity supplied?
- What is its value?
- What is your advice to return to the equilibrium situation?