Suppose that the world price of oil is roughly $60.00 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 20bb/yr and 14bb/yr from OPEC. Statistical studies have shown that the longrun price elasticity of demand for oil is 0.40, and the longrun competitive price elasticity of supply is 0.40. Using thisinformation, derive linear demand and competitive supply curves for oil.

Let the demand curve be of the general form Q=abP and the competitive supply curve be of the general form Q=c+dP, wherea, b,c, and d are constants.

The equation for the longrun demand curve is

A.

Q=13.8047.80P.

B.

Q=47.80P.

C.

Q=47.800.23P.

D.

Q=13.800.23P.

E.

Q=47.80+0.23P.

The equation for the longrun competitive supply curve is

A.

Q=12.200.13P.

B.

Q=7.80+0.23P.

C.

Q=7.80+0.13P.

D.

Q=12.20+0.13P.

E.

Q=12.20+47.80P.