Why is it not possible to conclude that OPEC total revenue would increase if it were to cut its production does the elasticity of non- supply have any influence on how the price of crude oil changes?

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2026-07-17 19:06

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OPEC acts like a monopoly on crude oil. They can cut production and decrease the supply of oil, thus raising the price, but this does not necessarily increase revenue. As the price increases, the demand decreases. The percentage change in quantity demanded in response to a one percent change in price, while holding all other factors constant, is called price elasticity of demand. If the price elasticity of demand is high, then the demand will decrease significantly as the prices increase, and revenue may not increase.

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