Question

Assume the price of gasoline doubles tonight and remains at that price the next two years. The price elasticity of demand for gasoline measured tomorrow will be ______ when compared with the price elasticity of demand for gasoline measured two years from now.
A. more elastic
B. larger in absolute value
C. the same
D. more inelastic

Answer 1

Answer:

The correct answer is letter "D": more inelastic.

Explanation:

When its price changes, the supply, and demand for an inelastic good or service are not dramatically impacted. Whether the price of an inelastic product goes up or down, the buying habits of consumers remain roughly the same. Prescription drugs, food, clothing, and gasoline are common examples of inelastic goods.

Thus, if the price of gasoline doubles tonight, that price would be considered more inelastic tomorrow compared to the current price until today than comparing the doubled price during the course of the upcoming two years.