If the Elasticity of Demand for Oil Is 0

question 64

Multiple Choice

If the elasticity of demand for oil is 0.5 and the elasticity of supply for oil is 0.3, then a 1 percent increase in the supply of oil would cause the price of oil to:

• A) increase by 1.25 percent.
• B) increase by 2.50 percent.
• C) decrease by 1.25 percent.
• D) decrease by 2.50 percent.

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Definitions:

Free World Trade

The unhindered exchange of goods and services across international borders, encouraging global economic integration and efficiency.

Farm Policy

Governmental regulations and practices concerning agricultural production, marketing, and trade, including subsidies, price supports, and land use regulations.

Subsidies

Financial assistance provided by governments to individuals, businesses, or other governments, aiming to encourage certain activities or reduce the prices of goods and services.

Policy Contradictions

Situations where policies or regulations implemented by governments or organizations have conflicting objectives or outcomes.