OPEC: no control over prices?
Price Elasticity of Supply is a measure of the responsiveness of the quantity supplied of product (A) to a change in price of product (A) alone. Surplus is a situation in which the quantity supplied exceeds the quantity demanded for a good or service; the price of a good is above equilibrium price. Another term to note is demand: the amount of a particular economic good or service that a consumer or group of consumers will want to purchase at a given price. Typically, quantity demanded decreases with increases in price. Lastly, supply is the total amount of a good or service available for purchase. Typically, quantity supplied increases with increases in price, in this article. In this article, OPEC had decided to reduce oil production to hopefully increase the rapid decline in oil prices, however their plan did not work and oil prices continued to plummet.
Elasticity of Demand is the responsiveness of the for a good or to the increase or decrease in its . Normally, increase with drop in and decrease with rise in prices. As a general , non-essentials like cars show elasticity of demand whereas most and items such as cigarettes and oil show inelasticity of demand (do not significantly more or less with in price). Although oil is said to be inelastic in both demand and supply, the laws applied to inelastic goods for supply, in which a change in prices would not change the supply of the product, do not apply in this situation as the quantity being supplied is being changed as a result of this fluctuation of crude prices.
