Suppose that the world price of oil is roughly$90.00 per barrel and that the world demand andtotal world supply of oil equal 34 billion barrels peryear (bb/yr), with a competitive supply of 20 bb/yrand 14 bb/yr from OPEC. Statistical studies haveshown that the long-run price elasticity ofdemand for oil is -0.40, and the long-runcompetitive price elasticity of supply is 0.40.Using this information, derive linear demand andcompetitive supply curves for oil.Let the demand curve be of the general formQ=a-bPand the competitive supply curve be of thegeneral formQ=c+dP,where a, b, c, and d are constants.The equation for the long-run demand curve isA.Q=47.50-0.15P.B.Q=13.50-47.50P.C.Q=47.50-P.D.Q=47.50+0.15P.E.Q=13.50-0.15P.

The long-run equilibrium point for a perfectly competitive market occurs where the demand curve…

Answered: where a, b, c, and d are constants. The…

where a, b, c, and d are constants. The equation for the long-run demand curve is A.Q=47.50-0.15P. B.Q=13.50-47.50P. C.Q=47.50-P. D.Q=47.50+0.15P.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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