Suppose That the Current Price of Oil Is $60 Per

Essay

Suppose that the current price of oil is $60 per barrel and the quantity sold is 90 million barrels per day.The current estimates of the price elasticity of supply and demand are η = 1 and
ε = -.2 respectively.
a.Compute linear equations for the supply and demand.
b.What will be the effects on the market price and quantity if the U.S.government suddenly decides to purchase an additional 2 million barrels of oil? Assume that the addition consumption of oil by the government results in a parallel shift of the supply curve to the left by 2 million barrels per day.