Demand and Supply Curves

question 4

Essay

Demand and Supply Curves. The following relations describe demand and supply conditions in the oil industry:

where Q is quantity measured in millions of barrels and P is price in dollars.

---

Definitions:

Excess Capacity

A situation in which a company can produce more goods or services than currently demanded, due to underused resources.

Economic Profit

Profit calculated by subtracting both explicit and implicit costs from total revenues, indicating the efficiency beyond the breakeven point.

Capital-Intensive

Describing industries or processes that require a high level of capital investment in machinery and equipment relative to labor.

Labor-Intensive

A process or industry that requires a high input of labor relative to capital in the production of goods or services.