Suppose That the Long-Run World Demand and Supply Elasticities of Crude

question 11

Essay

Suppose that the long-run world demand and supply elasticities of crude oil are -0.906 and 0.515, respectively. The current long-run equilibrium price is $30 per barrel and the equilibrium quantity is 16.88 billion barrels per year. Derive the linear long-run demand and supply equations. Next, suppose the long-run supply curve you derived above consists of competitive supply and OPEC supply. If the long-run competitive supply equation is: S_C = 7.78 + 0.29P, what must be OPEC's level of production in this long-run equilibrium?

Grasp the concept of deadweight loss resulting from taxes and understand its implications on economic welfare.

Understand the effects of price ceilings and price floors on market outcomes.

Analyze the impact of government subsidies on market prices, quantities, and the distribution of benefits between consumers and producers.

Understand the impact of a tax or subsidy on the selling price of a good and the net price paid by buyers.

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Definitions:

Thyroid Gland

The thyroid gland is an endocrine gland in the neck that produces hormones regulating metabolism and energy use in the body.

TSH

Thyroid Stimulating Hormone, a hormone produced by the pituitary gland that regulates the production of thyroid hormones.

Hormones

Chemical messengers produced by glands in the body, regulating various physiological processes and behavior.

ACTH

Adrenocorticotropic Hormone, a peptide hormone produced by the pituitary gland that stimulates the production of cortisol by the adrenal glands.