In the 1970s OPEC generated high prices for oil but could not sustain this in the mid-80s and 90s.The reason was that both the supply and demand elasticity for oil is less elastic in the short run than in the long run.

Question

Quizplus · Accepted Answer

This statement is true. In the short run, both the supply and demand for oil are relatively inelastic, meaning that changes in price have a relatively small impact on the quantity supplied or demanded. However, in the long run, there are more opportunities for substitution and technological change, which make both supply and demand more elastic. This is why OPEC's attempts to keep oil prices high in the 1970s were successful in the short run but ultimately unsustainable.

In the 1970s OPEC Generated High Prices for Oil but Could