For a given reduction in the supply of oil, the equilibrium price of oil will
A)decrease by a larger amount for a higher price elasticity of demand.
B)decrease by a smaller amount for a higher price elasticity of demand.
C)increase by a larger amount for a higher price elasticity of demand.
D)increase by a smaller amount for a higher price elasticity of demand.
E)not change, regardless of the price elasticity of demand.

Question

Quizplus · Accepted Answer

When demand is more elastic, consumers are more responsive to price changes, so a reduction in supply leads to a smaller increase in equilibrium price.

For a Given Reduction in the Supply of Oil, the Equilibrium