Table 56 Supply Deman IS IS Scenarioelastic elastic Scenario

Table 5-6 Supply Deman IS IS Scenarioelastic elastic Scenarioelastic inelastic Scenarioinelastic elastic Scenarioinelasticinelastic Refer to Table 5-6. Which scenario describes the market for oil in the short run in comparison to the long run? Select one a. Scenario D describes the short run whereas scenario A describes the long run. b. Scenario C describes the short run whereas scenario B describes the long run. c. Scenario D describes both the short run and the long run. d. Scenario A describes both the short run and the long run.

Solution

The answer is \"A\", Scenario D describes the short run whereas the Scenario A describes the long run.

In the short run, the demand and supply both are inelastic i.e. if there is an increase in the price of the Oil the demand for the oil will remain more or less the same making it demand inelastic and if there is an increase in the price of oil it will take a while before the suppliers will increase the production making it supply inelastic.

In the long run, things are perfectly elastic if the price increase the demand will change an so will the supply.