Question

Due to an "agreement" in OPEC to cut oil supply, prices have rebounded to the 50's....

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?

Homework Answers

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.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The OPEC countries produce about 40% of the world's crude oil. Suppose that OPEC cuts its...
The OPEC countries produce about 40% of the world's crude oil. Suppose that OPEC cuts its crude oil production by 10%. Assume that no other nation changes its oil production during the time frame being considered and that the price elasticity of demand for crude oil over that period is −0.1. What will be the percentage change in the world price of oil? (Hint: First, calculate the percentage change in the world oil production as a result of OPEC's production...
Saudi ends voluntary output cut as oil prices rebound . Saudi Arabia will boost output in...
Saudi ends voluntary output cut as oil prices rebound . Saudi Arabia will boost output in July to match its Opec quota while ending voluntary deeper cuts as it sees need for more oil at home amid signs of global demand recovery, the Saudi energy minister said on Monday. Market sources expect the UAE and Kuwait will also follow suit by not extending beyond June their voluntary additional oil output cuts of 1.180 million barrels per day. Opec+ alliance, including...
Suppose OPEC breaks apart and oil prices fall substantially. Initially, which curve shifts in the aggregate...
Suppose OPEC breaks apart and oil prices fall substantially. Initially, which curve shifts in the aggregate supply/aggregate demand model? In what direction does it shift? What happens to the price level and real output (GDP). Graph your answer.
OPEC is an intergovernmental organization of 13 nations. As of 2015, the 13 countries accounted for...
OPEC is an intergovernmental organization of 13 nations. As of 2015, the 13 countries accounted for an estimated 42 percent of global oil production and 73 percent of the world's "proven" oil reserves, giving OPEC a major influence on global oil prices that were previously determined by American-dominated multinational oil companies. Understanding this type of dynamic in which a few countries (or firms) dominate the market being able to set the price, yet unable to raise significant barriers to entry...
Assume that the economy is beginning at equilibrium. There is a supply shock and OPEC has...
Assume that the economy is beginning at equilibrium. There is a supply shock and OPEC has decided to lower production, which raises the price of oil worldwide. What will happen to the price level and RGDP in the short-run? Label the original point (A) and the new point after the shift as (B) Assume that the price level is flexible downwards as well as upwards. (3) b) Assume that the government in reaction assumes a Classical stance and does not...
International Finance Imagine that oil prices have recently dropped to $48 per barrel. Suppose you are...
International Finance Imagine that oil prices have recently dropped to $48 per barrel. Suppose you are a member of the monetary policy committee of a small open economy, dependent on oil exports, which also wants to maintain a currency peg to the dollar. (a) Describe the pressures (in the form of appreciation or depreciation) that the domestic currency would face due to the decrease in oil prices. (Hint: Think about the effects of the lower oil prices−export prices−on the current...
(For simplicity use hypothetical prices) Assume that the world price of oil is $15 per drum....
(For simplicity use hypothetical prices) Assume that the world price of oil is $15 per drum. At that price, Country A imports 400 million drums a day and consumes 600 million drums a day. The government then imposes a $50 per drum tax oil imports. For every $1 increase in oil prices, domestic consumption goes down 20 million drums a day while domestic production goes up 40 million drums a day. a) What will the new oil price be? (assume...
(a) Oil prices have fallen by about a third since December of last year. Is this...
(a) Oil prices have fallen by about a third since December of last year. Is this a positive or a negative aggregate supply shock for China, a net importer of oil? Use the labor market and the production function to predict the effects of lower oil prices on employment, output, and the real wage in China. (b) Because of a decrease in the working-age population, Chinese labor force is now shrinking (The Economist, Feb 23, 2019). How does this change...
"Over the past twenty years, the price of personal computers has decreased in spite of increased...
"Over the past twenty years, the price of personal computers has decreased in spite of increased demand for personal computers. This can best be explained by:" A."suppliers of personal computers are unresponsive to price changes, meaning that prices have not increased even though demand has increased." B."demanders of personal computers are very price responsive, meaning that consumers will not put up with higher computer prices." C."computers are an inferior good, so increased demand simply results in lower prices." D. a...
Question 1 By relying on the IS LM Model explain what will be the effect of...
Question 1 By relying on the IS LM Model explain what will be the effect of a tax cut policy on the equilibrium level of income. Explain in detail the different steps, how does this policy impact the investment? Question 2 Keynesian economics assume that prices are sticky (they do not change) in the short run. It is an assumption shared by classical economics. Explain briefly what are the characteristics of classical economists and according to them what drives the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT