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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: SC = 7.78 + 0.29P, what must be OPEC's level of production in this long-run equilibrium?


Definitions:

Abnormality

Deviation from the norm or average, often used to describe differences in behavior, physical or mental health that are unusual or not typically observed.

Hospital Of Saint Mary Of Bethlehem

Originally a psychiatric hospital in London, known historically for its association with the treatment of mental illnesses.

Deplorable Conditions

Conditions that are very bad, miserable, or appalling in nature, often in reference to living situations or environments.

Bedlam

A scene of uproar and confusion; historically referring to the Bethlem Royal Hospital, a London psychiatric institution known for its chaotic conditions.

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