The Organization of the Petroleum Exporting Countries (OPEC) is a permanent inter governmental organization, currently consisting of 12 oil producing and exporting countries, spread across America, Asia and Africa. OPEC Countries produce about 40% of the world's crude oil. The Oil and Energy Ministers of the OPEC Member Countries meet at least twice a year to coordinate their oil production policies.
Suppose that at its next meeting, OPEC decides to cut crude oil production by 10%. How will this affect world oil prices? Assume that no other nation increases its oil production during the time frame being considered. (In your calculations use the conventional formula for percentage changes, rather than the midpoint formula.)
The reduction of OPEC oil production by 10% will decrease world oil supply by:
Suppose that the price elasticity of demand for oil is estimated at 0.2. This means that the decrease in world production of oil will raise oil prices by:
Please answer with 1 digit after the decimal point and in percent
Suppose the current price of oil is $70 per barrel. You forecast that the new price of oil resulting from the OPEC's decision to cut production will be:
Please enter 2 digits after the decimal point.