Question

Time horizon and elasticity The time horizon of the demand curve is one determinant of the price elasticity of demand. If the price of gasoline is relatively high for a long time, consumers are more likely to buy fuel-efficient cars or switch to alternatives like public transportation. Therefore, the demand for gasoline is ____ elastic in the long run than in the short run.

a. more
b. no more nor less
c. less

Answer 1

Answer: a. More

Step-by-step explanation:

The demand for gasoline is more elastic in the long run than in the short run.

Price Elasticity is defined as the degree by which demand changes as a result of a change in price. If gasoline prices were to change today, people would stll buy them because they still need gasoline in their every day lives showing that gasoline is less elastic in the short run.

However, if prices remain high even in the long run, people start buying more efficient cars and taking public transport which means they will demand less gasoline because they need less. This drop in demand in the long run because of a high price shows more elascticity in the long run.