Question

A large increase in gas prices creates a demand for cars with good gas mileage. It takes months for car companies to make these cars. How do you describe this market for cars?

a. inelastic
b. elastic
c. static
d. inferior

Answer 1

If a large increase in gas prices creates a demand for cars with good gas mileage, and it takes months for car companies to make these car, you could describe this market for cars as inelastic, because it's a short run and the firm cannot easily change its output level.
I would say the correct answer is A.