Question

Suppose that the world price of oil is roughly $60 per barrel and that the world demand and total world supply of oil equal 34 billion barrels per year (bb/yr), with a competitive supply of 20 bb/yr and 14bb/yr from OPEC. Statistical studies have shown that the long-run price elasticity of demand for oil is -0.40, and the long-run competitive price elasticity of supply is 0.40. Using this information, derive linear demand and competitive supply curves for oil.

Let the demand curve be of the general for Q=a-bP and the competitive supply curve is of the general form Q=c+dP, where a, b, c, and d are constants.

The equation for the long-run demand curve is: ______

The equation for the long-run competitive supply curve is: _____