Elasticity of Oil

Reply Wed 31 Oct, 2012 10:26 am
Hello I am writing a paper for my Economics class and was hoping someone could let me know if it seems like I have answered the question correctly. Here is the assignment.

Imagine the demand curve for petroleum-based motor oil. Before the invention of synthetic motor oil, suppose that at a price of 5 dollars per quart US consumers demanded 20 million quarts of petroleum-based motor oil per month. At a price of 6 dollars US consumers demanded 19.5 million quarts per month. Next, suppose that synthetic oil has been developed and is now available for purchase as a substitute for petroleum-based oil.

Assignment: Describe how this event impacts the PED for petroleum-based oil. Will demand become more or less elastic and why? Given your answer to this first question, will PED rise or fall after the introduction of the synthetic substitute? (For your information, the PED before the introduction of synthetic oil is .1392 using the 2 points on the demand curve identified in the second paragraph). Keep your answers short and to the point. Good luck!

He says he wants it short and simple but it also says it needs to be 3 pages.

So far I have figured out that the petroleum based oil will become more elastic and that PED will rise but I can't figure out how to make it 3 pages. Can someone help me please??
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