B1 Suppose that you have been hired as an Economic Consultant by OPEC and given
ID: 342918 • Letter: B
Question
B1 Suppose that you have been hired as an Economic Consultant by OPEC and given the following schedule showing the world demand and supply for oil: (4 marks) Quantity Supplied (Qs) Price (P)Quantity Demanded (QD) S/barrel) (millions of barrels/day)Cmillions of barrels/day) 10 20 30 40 50 60 50 40 30 20 20 30 40 50 60 Answer the following questions a. At what price, the oil market will be in equilibrium situation? b. IfOPEC produces 50 million of barrels/day, calculate its Total Revenue (TR)? c. If the price of oil rises from $40 to $50 per barrel, what will be the Total Revenue (TR) from oil sales? Also mention either TR will increase or decrease? d. When the price changes from $30/barrel to $40/barrel, calculate Price Elasticity of Demand (Ed)?Explanation / Answer
At $30, the supply = demand
If OPEC produces 50 Million barrels per day, then the demand is 30 million barrels per day. Therefore, total revenue at $40 per barrel is 1200 million per day.
@$40, demand is 30 million barrels per day, total revenue is 1200 million per day
@$50, demand is 20 million barrels per day, total revenue is 1000 million per day
There is a decrease of 200 million in revenue per day
Q1 30 Q0 40 P1 40 P0 30 Q1-Q0 -10 Q1+Q0 70 P1-P0 10 P1+P0 70 Ed ((Q1-Q0)/(Q1+Q0))/((P1-P0)/(P1+P0)) Ed -1Related Questions
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