OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to: a. an inelastic demand for oil and a reduction in the amount of oil supplied. b. a reduction in the amount of oil supplied and a worldwide oil embargo. c. a worldwide oil embargo and an elastic demand for oil. d. a reduction in the amount of oil supplied and an elastic demand for oil.
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Step 1: Identify the factors that contributed to OPEC successfully raising the world price of oil in the 1970s and early 1980s. Show more…
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The process involved in bringing oil to world markets can take years. Substitutes for oil-based products such as gasoline are limited. As a result the supply of oil and the demand for oil are both perfectly elastic over short periods of time. the supply of oil is very inelastic and the demand for gasoline is inelastic over short periods of time. the supply of oil and the demand for oil shift to the right over short periods of time. the supply of oil is very elastic and the demand for oil is very elastic over short periods of time.
Andrew D.
Some years ago, the $New$ $York$ $Times$ reported that "the inability of OPEC to agree last week to cut production has sent the oil market into turmoil . . . [leading to] the lowest price for domestic crude oil since June 1990." a. Why were the members of OPEC trying to agree to cut production? b. Why do you suppose OPEC was unable to agree on cutting production? Why did the oil market go into "turmoil" as a result? c. The newspaper also noted OPEC's view "that producing nations outside the organization, like Norway and Britain, should do their share and cut production." What does the phrase "do their share" suggest about OPEC's desired relationship with Norway and Britain?
LAST WORD Go to the OPEC Web site, www.opec.org, and find the current "OPEC basket price" of oil. By clicking on that amount, you will find the annual prices of oil for the past 5 years. By what percentage is the current price higher or lower than 5 years ago? Next, go to the Bureau of Economic Analysis Web site, www.bea.gov, and use the interactive feature to find U.S. real GDP for the past years. By what percentage is real GDP higher or lower than it was 5 years ago? What if, anything, can you conclude about the relationship between the price of oil and the level of real GDP in the United States?
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