Assume that oil begins to run out and that extraction becomes more expensive. Trace through the effects of this on the market for oil and the market for other fuels.
Answer to relevant QuestionsWhy are both the price elasticity of demand and the price elasticity of supply likely to be greater in the long run?Illustrate on four separate diagrams (as in Figure) the effect of different elasticity’s of demand and supply on the incidence of a subsidy./Explain why the price of a good is no reflection of the total value that consumers put on it.If the industry under perfect competition faces a downward-sloping demand curve, why does an individual firm face a horizontal demand curve? What is meant by the prisoners’ dilemma game when applied to the behaviour of oligopolists? What will determine the outcome of the game?
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