Respuesta :
Oil has a low demand elasticity, and given how dependent the global economy is on oil, this means that demand for oil will not change much as prices change.
What is short run demand?
- The laws of supply and demand affect the oil industry primarily by determining the price of 'black gold'. Oil price expectations are a major factor in determining how companies in the industry allocate their resources.
- Prices create incentives to influence behavior. This action ultimately translates into supply and demand to determine the price of oil core paper.
- Oil supply is also rather inelastic given how complicated and expensive the process of setting up oil production in the first place is. Fluctuations in oil prices tend to be dramatic and often affect other parts of the global economy. Oil supply is even less elastic than most other commodities, as oil production often requires specialized investment. Much of the equipment used to mine gold and silver can be diverted to mine platinum and palladium when prices fluctuate. However, expensive equipment used for hydraulic fracturing and offshore drilling is often not usable for other purposes.
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