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12 September, 14:50

The elasticity of demand for oil is about 0.5, and the elasticity of supply is about 0.3. If the Arctic National Wildlife Refuge (ANWR) were drilled and the world supply of oil increased by 3%, what is the estimated percent change in the world price of oil?

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  1. 12 September, 16:25
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    3.75%

    Explanation:

    %∆P from shift in supply

    = (%∆S) / (|E D |+E S)

    = 3 : (0.5 + 0.3) = - 3.75%

    Where ∆ means "Change in"

    Cheers
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