ECONOMICS
ELASTICITY OF DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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an inelastic demand for oil and a reduction in the amount of oilsupplied.
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a reduction in the amount of oil supplied and a world-wide oil embargo.
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a world-wide oil embargo and an elastic demand for oil.
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a reduction in the amount of oil supplied and an elastic demand for oil.
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Detailed explanation-1: -In October 1973 the Persian Gulf members of OPEC doubled the price of their crude oil, then in January 1974 doubled it again. By that time the average price in the U.S. for imported oil had more than doubled to $6.92 per barrel, and by March it had increased to $11.10.
Detailed explanation-2: -"OPEC+ tailors supply and demand to balance the market, ” Kate Dourian of UK industry body the Energy Institute told the BBC. “They keep prices high by lowering supplies when the demand for oil slumps.” The group can also lower prices by pumping more oil into the market.
Detailed explanation-3: -Traders were paying money to get rid of oil. o Shortage of storage space forced OPEC to cut supply. Desired outcome of the supply cut was to increase oil price which has fallen into negatives due to record surplus due to worldwide lockdown.
Detailed explanation-4: -Oil Embargo, 1973–1974. During the 1973 Arab-Israeli War, Arab members of the Organization of Petroleum Exporting Countries (OPEC) imposed an embargo against the United States in retaliation for the U.S. decision to re-supply the Israeli military and to gain leverage in the post-war peace negotiations.