OPEC deadlocked on oil production hike
Oil prices exceeded $100-a-barrel Wednesday after OPEC said it could not reach an agreement about increasing crude oil production.
Source: CNN Money, June 8, 2011
Use the demand and supply model to illustrate OPEC’s deadlock.
Consider the market for oil.
Draw demand and supply curves consistent with the oil price exceeding $100 a barrel. Label the curves D0 and S0.
Draw a point at the market equilibrium price. Label it 1.
Now suppose that OPEC members agree to increase oil production.
Draw a curve to show the effect of this agreement in the market for oil. Label it.
Draw a point at the new market equilibrium. Label it 2.
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