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Consider the market for oil. As shown, a shift in the demand curve causes a price increase, followed by a price drop because long-run supply

Consider the market for oil. As shown, a shift in the demand curve causes a price increase, followed by a price drop because long-run supply is more elastic than short-term supply. What role does the elasticity ofdemandplay in the second price movement?

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Price SSR (per barrel) SIR EZ $90 $80 E3 E1 $50 D2 D1 Q1 Q2 Q 3 Quantity produced (barrels)

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