If the price of gasoline is relatively high for a long time, consumers are more likely to buy more fuel-efficient cars or switch

Question

vovikov84 [41]

2 years ago

7

If the price of gasoline is relatively high for a long time, consumers are more likely to buy more fuel-efficient cars or switch

to alternatives like public transportation. Therefore, the demand for gasoline
a. more elastic,
b. less elastic

Business

1 answer:

kicyunya [14] · Answer 1 · 2022-07-17T14:50:41+03:00

Answer: Option A

Explanation: In simple words, elasticity refers to the change in demand for a product due to change in its price.

If the price for the gasoline remains high in the long run then at one point substitution effect will come into play and consumers will shift their demand to the alternatives available.

However the product like gasoline will not show decrease in demand in the short run due to price as it more of an essential good to daily life.

Thus, the correct option is A.