Supply is Demand is
Scenario A elastic elastic
Scenario B elastic inelastic
Scenario C inelastic elastic
Scenario D inelastic inelastic
Which scenario describes the market for oil in the long run?
A. A
B. B
C. C
D. D
To determine which scenario describes the market for oil in the long run, we need to understand the concept of elasticity of supply and demand.
Elasticity refers to the responsiveness of quantity demanded or supplied to changes in price. If a market is elastic, it means that a change in price will result in a relatively larger change in quantity demanded or supplied. On the other hand, if a market is inelastic, it means that a change in price will result in a relatively smaller change in quantity demanded or supplied.
In Scenario A, both supply and demand are elastic. This implies that a change in price will lead to relatively larger changes in both quantity demanded and supplied. This scenario suggests that both producers and consumers of oil can easily adjust their behavior in response to price changes in the long run.
In Scenario B, supply is elastic but demand is inelastic. This suggests that producers can easily adjust the quantity supplied in response to price changes, but consumers' demand for oil is relatively unresponsive to price changes in the long run.
In Scenario C, supply is inelastic but demand is elastic. This implies that producers have limited ability to adjust the quantity supplied in response to price changes, while consumers' demand for oil is relatively responsive to price changes in the long run.
In Scenario D, both supply and demand are inelastic. This suggests that both producers and consumers have limited ability to adjust their behavior in response to price changes in the long run.
Based on the concept of elasticity and the scenarios provided, the scenario that best describes the market for oil in the long run is Scenario A, where both supply and demand are elastic.