Which of the following statements about the consumers' responses to rising gasoline prices is correct?

a. About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars.

b. About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars

. c. About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars.

d. Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run

Question

Ezekiel Fernandez

Business

9 April, 15:59

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

a. About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars.

b. About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars

. c. About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars.

d. Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run

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Answers (1)

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Nathaniel Hogan · Answer 1

c. About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars.

Explanation:

In a long run, The demand is more elastic than in a short run, this is because the consumers have both more time and number of substitutes to switch to. So almost 50% of long-run decrease in quantity demanded is due to less driving by people, while rest 50% is due to people switching to more fuel-efficient cars.