EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 1A.5, Problem 1TTA
To determine
To explain the operation of OPEC in term of
Expert Solution & Answer
Explanation of Solution
The following figure shows the effects on
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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Students have asked these similar questions
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It is Thursday afternoon, just a few days before the holiday season starts in your region, and you decided to visit your uncle Chao who owns a local delivery company. While sitting in the living room watching the evening news with your uncle, you heard the news reporter stating the following with an optimistic tone: "According to recent studies, gross domestic product (GDP) is rising due to an increase in consumer spending. The increase in spending was due to an increase in consumer confidence because the job market has shown a positive increase in both employment and income."
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Chapter 1A Solutions
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