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9. Assume the elasticity of demand for oil is 0.7, and the initial Quantity demanded is 100 million barrels a day. What is the impact of a 10 percent increase in the Price of oil on the Quantity of oil demanded? What happens to total expenditures? [Demand falls by 7 million barrels a day, Expenditure rises by 3 percent] Assume that the United States initially imports 50 million barrels a day, and that product remains unchanged. What happens to the level of imports and to expenditures on imports? [Import demand falls by 3.5 million barrels a day, Expenditure rises by 3 percent] Assume that in the long run, the elasticity of demand increases to 1. How does this change your answers? [Import demand falls by 5 million barrels a day, Expenditure does not change] 3

9. Assume the elasticity of demand for oil is 0.7, and the initial Quantity demanded is 100 million barrels a day. What is the impact of a 10 percent increase in the Price of oil on the Quantity of oil demanded? What happens to total expenditures? [Demand falls by 7 million barrels a day, Expenditure rises by 3 percent] Assume that the United States initially imports 50 million barrels a day, and that product remains unchanged. What happens to the level of imports and to expenditures on imports? [Import demand falls by 3.5 million barrels a day, Expenditure rises by 3 percent] Assume that in the long run, the elasticity of demand increases to 1. How does this change your answers? [Import demand falls by 5 million barrels a day, Expenditure does not change] 3

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter5: Elasticity
Section: Chapter Questions
Problem 26CTQ: What is the relationship between price elasticity and position on the demand curve? For example, as...
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9. Assume the elasticity of demand for oil is 0.7, and the initial Quantity demanded is 100 million barrels a day. What is the impact of a 10 percent increase in the Price of oil on the Quantity of oil demanded? What happens to total expenditures? [Demand falls by 7 million barrels a day, Expenditure rises by 3 percent] Assume that the United States initially imports 50 million barrels a day, and that product remains unchanged. What happens to the level of imports and to expenditures on imports? [Import demand falls by 3.5 million barrels a day, Expenditure rises by 3 percent] Assume that in the long run, the elasticity of demand increases to 1. How does this change your answers? [Import demand falls by 5 million barrels a day, Expenditure does not change] 3
Transcribed Image Text:9. Assume the elasticity of demand for oil is 0.7, and the initial Quantity demanded is 100 million barrels a day. What is the impact of a 10 percent increase in the Price of oil on the Quantity of oil demanded? What happens to total expenditures? [Demand falls by 7 million barrels a day, Expenditure rises by 3 percent] Assume that the United States initially imports 50 million barrels a day, and that product remains unchanged. What happens to the level of imports and to expenditures on imports? [Import demand falls by 3.5 million barrels a day, Expenditure rises by 3 percent] Assume that in the long run, the elasticity of demand increases to 1. How does this change your answers? [Import demand falls by 5 million barrels a day, Expenditure does not change] 3
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