A sharp increase in the price of gasoline
A)will reduce daily gas consumption by more tomorrow than it will six months from now.
B)will reduce gasoline consumption more six months from now than it will tomorrow.
C)will cause an increase in quantity of gasoline demanded if demand is perfectly inelastic.
D)will cause an increase in the quantity of gasoline demanded if demand is perfectly elastic.

Question

Quizplus · Accepted Answer

In the short term, consumers may not have options to reduce their daily gasoline consumption, but in the long term, they may find alternatives, such as carpooling, using public transportation or purchasing a more fuel-efficient car. Therefore, the price elasticity of demand for gasoline is higher in the long term, meaning that a sharp increase in the price of gasoline will reduce gasoline consumption more six months from now than it will tomorrow.

A Sharp Increase in the Price of Gasoline