Economics Question - Demand Curve

boozymc

I am studying Economics and have the following question to be completed. I am stuck on part B and was hoping for some help. Im not sure if there is even enough information in the question to answer it. Or what info specifically should i use?
I obviously dont expect someone to do the question for me, i just want a bit of advice on how it it done,

Assignment 1

Question 1

Table 1: Price and consumption of oil

Year Price Consumption (million barrels/day)

1988 18.53 65.0

1989 14.91 66.3
1990 18.23 66.8
1991 23.76 67.2
1992 20.04 66.4
1993 19.32 65.1
1994 17.01 67.3
1995 15.86 68.9
1996 17.02 71.4
1997 20.64 72.2
1998 19.11 73.9
1999 12.76 75.2
2000 17.90 76.7
2001 28.66 78.3
2002 24.46 79.2
2003 24.99 81.0
2004 28.85 83.3
2005 38.26 85.1
2006 54.57 85.8

2007 65.16 87.1

A) What factors affect the demand for oil on the world market?

Using the information given in table 1, construct a demand curve for oil for the

period 1988 to 2007.

i. Describe the curve
ii. Given what has been covered in class, and with the use of a diagram, what would you expect the demand curve for oil to look like? Provide anexplanation for your answer
iii. Does the actual demand curve for oil correspond with your expectations? Give possible explanations for any inconsistencies.
C) As accurately as possible, calculate the price elasticity of demand for each year beginning with 1989)

i. Given what has been covered in class, what value would you expect the price elasticity of demand for oil to be? Provide an explanation for your answer

ii. Do the actual values correspond with what you would expect? Highlight any

year that does not correspond to expectations.
D) Calculate the price elasticity of demand for each of the following periods of time and comment on the results.

i. 1988-1998
ii. 1999-2007

Consumption can be considered another word for demand.. does that help?

boozymc

not really, the info is letting me plot price or demand over time but as far as i know a demand curve would have price on the Y axis and wuantity demanded on the X axis. My attempts at plotting it have looked nothing like a curve

Time Magazine

A demand "diagram" (let's avoid the use of the word curve for a moment) does have price on the Y-axis and quantity demanded on the X-axis. You have more than enough information to plot that.

It might look weird but think that this data spans twenty years. That's more than enough time for temporary shocks (e.g. wars) where the demand curve would have shifted out.

boozymc

I still don't really get it but I'll try just plotting it all and hope for the best.

boozymc

boozymc wrote: »

not really, the info is letting me plot price or demand over time but as far as i know a demand curve would have price on the Y axis and wuantity demanded on the X axis. My attempts at plotting it have looked nothing like a curve

Lets leave the economics out of it for the moment...

You a table with three vectors of info.
The first vector contains dates, which doesn't help you to plot a graph.
You are left with Price info, and consumption info.
You can plot this. As these are the only two variables, and you require two variables to plot the graph, you can then assume that 'consumption' is 'quantity'.

Économiste Monétaire

boozymc wrote: »

My attempts at plotting it have looked nothing like a curve

I believe that's the point your lecturer is trying to make; juxtaposition between your regular text book, straight down, demand curve and what you're seeing in the oil market.