Question

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

Answer 1

Answer:

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.