Microeconomics 6th Edition by Robert Hall, Shirley Kuiper, Marc Lieberman

Exercise 10

In mid-2011,the International Monetary Fund came out with some controversial estimates of price elasticities of demand for oil-much lower than estimates in previous research. Their estimate for the long-run price elasticity of demand was 0.072,and for income elasticity of demand they estimated 0.294. Assuming that the long-run price elasticity of supply is 0.3,and that world income grows by 40% over the next 10 years,use the IMF's estimates to forecast the percentage increase in oil's price over the next 10 years.