This analysis shows why OPEC succeeded in maintaining a high price of oil
only in the short run. When OPEC countries agreed to reduce their production of
oil, they shifted the supply curve to the left. Even though each OPEC member sold
less oil, the price rose by so much in the short run that OPEC incomes rose. By contrast,
in the long run when supply and demand are more elastic, the same reduction
in supply, measured by the horizontal shift in the supply curve, caused a
smaller increase in the price. Thus, OPEC’s coordinated reduction in supply
proved less profitable in the long run.
only in the short run. When OPEC countries agreed to reduce their production of
oil, they shifted the supply curve to the left. Even though each OPEC member sold
less oil, the price rose by so much in the short run that OPEC incomes rose. By contrast,
in the long run when supply and demand are more elastic, the same reduction
in supply, measured by the horizontal shift in the supply curve, caused a
smaller increase in the price. Thus, OPEC’s coordinated reduction in supply
proved less profitable in the long run.
No comments:
Post a Comment