Question

Which of the following statements about the consumers’ responses to rising gasoline prices is correct?a. Because gasoline is a necessity, consumers do not decrease their quantity demanded in either the short run or the long run.b. Consumers react to a 10% increase in price with about a 10% decrease in quantity demanded in both the short run and long run.c. Consumers decrease their quantity demanded more in the short run than in the long run.d. Consumers decrease their quantity demanded more in the long run than in the short run.

Answer 1

Option (d) is correct.

Step-by-step explanation:

Gasoline is a normal good for the consumers. So, if there is an increase in the price of gasoline then as a quantity demanded for gasoline decreases.

Also, quantity demanded for gasoline decreases more in long run than in the short run, this is due to the elasticity of the demand curve. As we know that demand curve for gasoline is more elastic in the long run as compared to the short run.

If the demand curve is more elastic then a little change in the price of a commodity or a good tends to large change in the quantity demanded for that good.