Question

Elasticity Submit Assignment nouncements ignments cussions Due Thursday by 11:59pm Points 10 Submitting a text entry box or a file upload Available Mar 23 at 10am - Mar 26 at 11:59pm 4 days des ple Solve the following two problems and show all of your work. Provide your answers on word document and submit online. UI abus 1. Global use of crude oil fell from 64million barrels per day in 1980 to 58 million barrels per day in 1982. During the same time period, crude oil price soared from $15 per barrel to $37 per barrel. Calculate the price elasticity of demand for crude oil between 1980 and 1982 (keep the sign of the Elasticity coefficient). How would you classify the crude oil demand? Ezzes dules ferences aborations 2. Based on the market trends, experts in oil industry suggested that crude oil prices would jump from $37 to $70 per barrel in 2017 to ensure ample supply in the global market. Assuming demand elasticity (with sign) remain unchanged (as your answer suggests in part 1), how many barrels of crude oil per day was consumed globally in 2017? (Assume initial demand remained at the level of 58 million barrels per day). opto Recordings re to search Opew

Answer 1

Q1) Price elasticity of Demand = % change in Quantity/ %change in price.

% change in Quantity from year 1980 to 1982= -9.36

% change in Price from year 1980 to 1982= 146.67

Price elasticity of Demand for crude oil between 1980 and 1982 = -9.36/146.67= -0.06

Crude oil demand is inelastic.

Q2) % change in Price= 0.89

% change in Quantity = % change in price× price elasticity of demand

% change in Quantity= 0.89× -0.06= -0.0534

Now initial quantity= 58 million barrels per day

Let final quantity ne denoted as QF

Now, % change in Quantity = {(QF-58)÷58} × 100

-0.0534= {(QF-58)÷58} × 100, Solving equation for QF,

We get QF= 57.97

Crude oil consumed daily in 2017 globally was 57.97 million barrels