Question

When consumers face rising gasoline prices, they typicallya.reduce their quantity demanded more in the long run than in the short run.b.reduce their quantity demanded more in the short run than in the long run.c.do not reduce their quantity demanded in the short run or the long run.d.increase their quantity demanded in the short run but reduce their quantity demanded in the long run.

Answer 1

Answer:

The correct answer is option a.

Explanation:

An increase in the price of gasoline would make it expensive to purchase gasoline. The consumer will be able to afford a lesser quantity of gasoline with the same income. The price increase will decrease the purchasing power of the consumer.  

As a result, the quantity demanded of gasoline will decline. But the consumer needs some time to adjust its demand. So the quantity demanded will reduce to a lesser extent in the short run.  

But in the long run, the consumers will have enough time to adjust demands so the quantity demanded will decline to a greater extent in the long run.