In September 2019 Saudi Arabia significantly reduced the production of oil as a result of drone attacks on two oil refineries in the country which led to the reduction of 5.7 million barrels of crude oil per day from the two refineries.Source: Middle East Monitor (2019). See link: https://www.middleeastmonitor.com/20190915-saudi-arabia-temporarily-cuts-oil-production/

At the same time the demand for oil is generally considered to be price inelastic. See for example, Plumer, Brad (2016) See link: https://www.vox.com/2016/4/13/11401564/crude-oil-pricespredictions

If the demand for oil is price-inelastic, the reduction in oil production will increase the revenue received by the countries that produce oil. Explain why this is so. Use a diagram to support your answer. (5 marks)