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Suppose that the long-run world demand and supply elasticities of crude oil are -0.906 and 0.515, respectively. The current long-run equilibrium price is $30 per barrel and the equilibrium quantity is 16.88 billion barrels per year.
a. Derive the linear long-run demand and supply equations.
b. Would you expect the short-run demand and supply elasticities to differ from the long-run elasticities? Explain.
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