Japan consumes an average of 35 crude oil barrels (per 1000 people per day) at a...

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Japan consumes an average of 35 crude oil barrels (per 1000 people per day) at a price of $50 per oil barrel. A new tax of 10% on the price of oil is introduced. The short run oil price elasticity of demand is -0.071 and -0.357. (i) (ii) (iii) What is the rationale behind higher magnitude of long-run elasticity compared to short run elasticity? What would be the consumption of oil (per 1000 people per day) in Japan after the tax hike in the short run? What would be the consumption (per 1000 people per day) in the long run? Japan consumes an average of 35 crude oil barrels (per 1000 people per day) at a price of $50 per oil barrel. A new tax of 10% on the price of oil is introduced. The short run oil price elasticity of demand is -0.071 and -0.357. (i) (ii) (iii) What is the rationale behind higher magnitude of long-run elasticity compared to short run elasticity? What would be the consumption of oil (per 1000 people per day) in Japan after the tax hike in the short run? What would be the consumption (per 1000 people per day) in the long run?

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i What is the rationale behind the higher magnitude of longrun elasticity compared to shortrun elasticity The longrun elasticity of demand is typicall... View the full answer