Why did Saudi Arabia push for production cuts?

Economics Drove Saudi OPEC Move
by: Summer Said and Benoit Faucon
Sep 30, 2016
Click here to view the full article on WSJ.com
Click here to view the video on WSJ.com 

TOPICS: Oil Markets

SUMMARY: Behind the kingdom's decision to agree to production cuts was a recognition of the consequences of low oil prices, according to people familiar with the matter.

CLASSROOM APPLICATION: Students can evaluate Saudi Arabia's decision to cut oil production, while exempting Iran from the cartel's production limits.

QUESTIONS: 
1. (Advanced) Why is OPEC cutting oil production? Are the production cuts motivated by government budget issues of member countries?

2. (Advanced) Why is the cartel exempting some member countries from production cuts?

3. (Introductory) What is a market-share policy, which is noted in the article?

Reviewed By: James Dearden, Lehigh University

Questions:

1. Estimate the price elasticity of oil using the data the article reports.
2. Will Saudi Arabia benefit from the cut if Iran maintains its current level of output?
3. Will Iran benefit from the cut if it maintains its current level of output?
4. When would Iran benefit more, when it maintains its current level of output or when it increases its output?