Suppose the price of a barrel of oil rises by 25% on world markets. As a result, the quantity demanded for oil falls by 5% in the short-run and 12.5% in the long-run.

Using the percentage changes given above, compute the price elasticity of demand in the short-run and in the long-run. (show work)

Why does the short-run elasticity differ from the long-run elasticity?

The rise in the price causes the revenues from selling oil to change. In which period (short-run or long-run) would the oil sellers experience a larger change in their revenues? Explain your answer.