Price (dollars per barrel) CHAPTER • The Basics of Supply and Demand 57 200 190 180 170 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 ST SЈT SC PЈ = 173.44 D P* = 80.00 Q* = 32 10 15 20 25 30 35 40 Quantity (billion barrels/yr) (a) 160 D 150 SC SЈT ST 140 130 Price (dollars per barrel) 120 P′= 95.81 110 100 90 80 70 P*= 80.00 60 50 40 30 20 Q* = 32 10 0 (b) 10 15 20 25 30 Quantity (billion barrels/yr) 35 40 45 F IGURE 2.23 IMPACT OF SAUDI PRODUCTION CUT The total supply is the sum of competitive (non-OPEC) supply and the 13 bb/yr of OPEC supply Part (a) shows the short-run supply and demand curves If Saudi Arabia stops producing, the supply curve will shift to the left by bb/yr In the short-run, price will increase sharply Part (b) shows long-run curves In the long run, because demand and competitive supply are much more elastic, the impact on price will be much smaller