Please answer this ASAP: Consider that the elasticity of demand for crude oil is empirically estimated...
Please answer this ASAP: Consider that the elasticity of demand for crude oil is empirically estimated to be -0.18 in the short run. The current price of oil is forecast to increase 15% over the next month, due to a refinery outage. What is the estimated change in the quantity demanded, due to this price change?
| A 2.7% decrease in quantity demanded |
| A 1.2% decrease in quantity demanded |
| A 0.27% decrease in quantity demanded |
| An 83.3% decrease in the quantity demanded. |
| None of the answers provided. |
Homework Answers
Price elasticity of demand = (% change in quantity demanded/ % change in price)
Price elasticity of demand = -0.18
% change in price = 15%
-0.18 = % change in quantity demanded / 15%
% change in quantity demanded = 2.7%
Because of 15% increase in price , there is a 2.7% decrease in quantity demanded.Hence, option(A) is correct.
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