What does the following statement imply about price elasticity of demand? "An unexpected spike in world oil prices leads to dramatic increase in revenue for the world's oil producers."
A)short-run demand for oil is inelastic
B)short-run demand for oil is elastic
C)elasticity of demand for oil is equal to one
D)elasticity of demand for oil is constant
E)elasticity of demand for oil is equal to zero

Question

Quizplus · Accepted Answer

An unexpected spike in world oil prices leads to a dramatic increase in revenue for the world's oil producers, implying that the quantity demanded of oil did not decrease significantly despite the increase in price. This suggests short-run demand for oil is inelastic because consumers have few close substitutes in the short term and can't reduce their consumption quickly.

What Does the Following Statement Imply About Price Elasticity of Demand