Question

The price elasticity of demand in the United States for crude oil has been estimated to be minus 0.061 in the short run and minus 0.453 in the long run. ​Source: John C. B.​ Cooper, "Price Elasticity of Demand for Crude​ Oil: Estimate for 23​ Countries," OPEC Review​, ​March, 2003, pp.​ 1-8. The demand for crude oil _________.A. is price elastic in both the short and long run as there exists many substitutes for crude oil.
B. is more price elastic in the long run than in the short run because in the long run a substitute for crude oil may be found.
C. is more price inelastic in the long run than in the short run because in the short run a substitute for crude oil may be found.
D. is equally price inelastic in both the short and long run as there are not many substitutes for crude oil.

Answer 1

Answer:

B) is more price elastic in the long run than in the short run because in the long run a substitute for crude oil may be found.

Explanation:

First of all, the demand for oil is extremely inelastic in both the short run and the long run. It is extremely inelastic in the short run, because alternative energy sources or alternative materials are not a possibility in the short run. For example, Tesla which is one the most valuable car makers in the world, only sold 367,500 cars last year, while the Volkswagen group (sells 12 different car brands) sold over 10 million.

On the long run, the demand for oil is still very inelastic, but much less than in the short run. The PED in the short run is 0.061 v. 0.453 in the long run. Hopefully in the long run we (as humanity as a whole) will find a cleaner and safer substitute for oil. The probability of an oil substitute in the future makes the PED more elastic or it is better to say, less inelastic.

Answer 2

Answer: B. is more price elastic in the long run than in the short run because in the long run a substitute for crude oil may be found

Explanation:

The Demand for Crude oil is more elastic in the long run than in the short run because in the long run a substitute for crude oil may be found.

Crude oil is more elastic in the long run because consumers have enough time to find substitute products for crude oil. Price elasticity of demand in the short run  is low because consumers donot have sufficient time to look for substitutes , they donot have much of a choice but to take whatever price is charged by producers of crude oil