Question 4 = Suppose the global supply function of crude oil is Qsı 100 + 2P, and the global demand function is QDI = 250-3P, with price in US$ and quantity in terms of millions of barrels. Answer the questions below (round the answers to 2 decimals when necessary). Section A. Suppose that the middle east conflicts between Israel and Arabian countries disrupts the supply of world crude oil, and changes its supply function to Qs2 = 90+ P. a. b. C. d. What are the equilibrium price and quantity of crude oil before the Middle East conflicts? What are the equilibrium price and quantity of crude oil after the Middle East conflicts? Based on your answers in part a and part b, find the price elasticity of demand for crude oil using the midpoint approach. Is it elastic or inelastic? What are consumers' expenditures on crude oil before and after the Middle East conflicts? Do they increase or decrease? Use your answer to part c to briefly explain the reason. Section B. Continue with Section A. Now suppose that middle east conflicts promote EU countries to find new resources for natural gas, which lowers the demand for the crude oil and changes its demand function to Q2 = 220 - 4P. Note that the supply function is still Qs2=90+ P due to the conflicts. e. f. What are the equilibrium price and quantity of crude oil after the finding of the new resources for natural gas? Based on your answers in part b and part e, find the price elasticity of supply for crude oil using the midpoint approach. Is it elastic or inelastic? Section C. Continue with section B. Now suppose that the Middle East conflicts are successfully resolved by international interventions, and hence the supply function of crude oil gets back to Qsi = 100+ 2P. Note that the demand function is still QD2 = 220-4P due to the finding of the new resources for natural gas. g h. i. j. What are the new equilibrium price and quantity of crude oil after the conflicts are solved? Based on your answers in part e and part g, find the new price elasticity of demand for crude oil using the midpoint approach. How is it comparing to the elasticity you find in part c? Now let us consider another situation: move along the new demand curve QD² = 220-4P from the equilibrium price in part a to the equilibrium price in part b. Find the new price elasticity of demand for crude oil using the midpoint approach. How is it comparing to the elasticity you find in part c? In both part h and part i, you compare the new price elasticity of demand for crude oil to that you find in part c. Which comparison makes more sense? Why? Is the result of that comparison consistent with the economic mechanism that you learned in class?