Current increases in the price of gasoline are expected to persist indefinitely. Based only on this information, the long minus run demand for gasoline would be expected to be A. relatively inelastic comma as compared to the short minus run demand. B. relatively elastic comma as compared to the short minus run demand. C. unitary. D. There is not enough information to determine anything about elasticity

Question

Jeremiah Mckinney

Business

10 July, 10:57

Current increases in the price of gasoline are expected to persist indefinitely. Based only on this information, the long minus run demand for gasoline would be expected to be A. relatively inelastic comma as compared to the short minus run demand. B. relatively elastic comma as compared to the short minus run demand. C. unitary. D. There is not enough information to determine anything about elasticity

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Wilson Ball · Answer 1

A. relatively inelastic comma as compared to the short minus run demand

Explanation:

Price elasticity of demand is a measure of the sensitivity of demand for a good or service to changes in the price of that product. We say that the price elasticity of demand is elastic when a percentage change in the price of this good has major impacts on demand. On the contrary, we say that the price elasticity of demand is inelastic when variations in the price of goods have little or no influence on demand.

In the short run, an increase in gasoline prices may be unwelcome by consumers who may stop buying gasoline, meaning that in the short run the demand for gasoline tends to be elastic. However, over time consumers have realized that the price hike has not been temporary and that the new price is indeed a reality. Since gasoline is a commodity of great need for car owners, the tendency is for consumers to adapt to the new price in the long run, making demand more inelastic.