When the oil-exporting countries of the Middle East raised the price of crude oil very sharply,tens of billions of dollars were transferred from the oil-consuming to the oil-exporting nations.From this one can conclude that
A) there is no substitute for Middle East oil.
B) the demand for crude oil is highly price elastic.
C) the demand for crude oil is highly price inelastic.
D) the demand curve for crude oil is horizontal.
E) the demand for crude oil is unit-price elastic.

Question

Quizplus · Accepted Answer

When the price of crude oil was raised sharply by the oil-exporting countries of the Middle East, tens of billions of dollars were transferred from the oil-consuming countries to the oil-exporting nations. This suggests that the demand for crude oil is highly price inelastic, meaning that a change in price has a relatively small impact on the quantity demanded. If the demand for crude oil were highly price elastic, a large increase in price would result in a significant decrease in quantity demanded, and the transfer of billions of dollars would be less likely to occur.

When the Oil-Exporting Countries of the Middle East Raised the Price