Future Supply and Demand for Crude Oil

Price per barrel (2208) Daily US demand for crude oil (in millions of barrels per day) Daily US supply of crude oil (in millions of barrels per day)

$25.00 1.0 0.5

$30.00 0.9 0.6

$35.00 0.8 0.7

$40.00 0.7 0.8

$45.00 0.6 0.9

$50.00 0.5 1.0

$55.00 0.4 1.1

Data from **https://www.iea.org**

Question 1:

Equilibrium:

Question 2

Question 3

Question 4

Question 5

Profit Maximization

Base price of unleaded regular delivered in New York harbor (January 27, 2020) $1.517

Added cost to Cal:

Maryland state gasoline tax (Effective July 1, 2018) $0.353

Federal gasoline tax $0.184

Distribution & Delivery $0.042

Advertising and Marketing to Exxon Mobil $0.042

Additives $0.020

Total additions $0.641

Total cost per gallon $2.158

Answer question 1 below.

Quantity Price

4000 2.658

3600 2.758

Average Average

% change % change Elasticity of Demand

Elasticity:

By how much did revenues increase or decrease as a result of the change in price?

By how much did profits increase or decline?

Gallons sold per day Price Revenue (price x gallons) Cost per Gallon Variable Cost (cost per unit x volume) Fixed cost per day Total Cost (Fixed + Variable) Daily Profit (revenue – all costs)

4000 $2.658 $10,632.00 $2.158 $8,632.00 $438.00 $9,070.00 $1,562.00

3600

Answer question 2 below.

Quantity Price

3600 2.758

4400 2.558

Average Average

% change % change Elasticity of Demand

Elasticity:

By how much did revenues increase or decrease as a result of the change in price?

By how much did profits increase or decline?

Gallons sold per day Price Revenue (price x gallons) Cost per Gallon Variable Cost (cost per unit x volume) Fixed cost per day Total Cost (Fixed + Variable) Daily Profit (revenue – all costs)

3600

4400

Answer question 3 below.

Quantity Price

4400 2.558

4800 2.458

Average Average

% change % change Elasticity of Demand

Elasticity:

By how much did revenues increase or decrease as a result of the change in price?

By how much did profits increase or decline?

Gallons sold per day Price Revenue (price x gallons) Cost per Gallon Variable Cost (cost per unit x volume) Fixed cost per day Total Cost (Fixed + Variable) Daily Profit (revenue – all costs)

4400

4800

Profit Maximization

Gallons sold per day Price Revenue (price x gallons) Cost per Gallon Variable Cost (cost per unit x volume) Fixed cost per day Total Cost (Fixed + Variable) Daily Profit (revenue – all costs)

2400 $3.058 $7,339.20 $2.158 $5,179.20 $438.00 $5,617.20 $1,722.00

2800 $2.958

3000 $2.908

3200 $2.858

3600 $2.758

4000 $2.658

4400 $2.558

4800 $2.458

5200 $2.358

5600 $2.258

6000 $2.158

6400 $2.058

6800 $1.958

7200 $1.858

7600 $1.758

8000 $1.658

8400 $1.558

8800 $1.458

9200 $1.358

Answer question 5 below.

Marginal Revenue Marginal Cost

Gallons sold per day Price Revenue (price x gallons) Marginal revenue Cost per gallon Variable Cost Fixed Cost Total Cost Marginal Cost

2800.0 $2.958000 $8,282.40 $2.158 $6,042.40 $438.00 $6,480.40

2800.1 $2.957975 $8,282.63 $0.2258 $2.158 $6,042.62 $438.00 $6,480.62 $0.2158

3000.0 $2.908000

3000.1 $2.907975

3200.0

3200.1

3600.0

3600.1

4000.0

4000.1

4400.0

4400.1

4800.0

4800.1

5200.0

5200.1

5600.0

5600.1

Select One

Price Elastic

Price Inelastic

Unit Price Elastic