Question

Due to an "agreement" in OPEC to cut oil supply, prices have rebounded to the 50's. How does "marginal economics" factor into these changes? What are the motivations of the different suppliers as prices change?

Answer 1

Due to Cut in oil supply due to an agreement the OPEC countries are supplying the oil at price which is rebounded to 50s. Due to this there will be change in different marginal economic factor like marginal revenue, and level of supply and cost becomes more affordable and profitable. On the other hand who are the buyers of these oil from OPEC country they have to incur more marginal cost because to get 1 unit of extra oil they have to pay higher price. So the marginal value or marginal economic factors of suppliers will be gainful.

Different supplier of oil will be motivated from these changes. Because supplier will get more revenue in terms of selling the oil in world market because they will get higher price. This will create positive impact and there will have tendency to supply more or produce more. These are the positive motivation supplier will get as price changes.