Question

Suppose the price elasticity of demand for heating oil is 0.1 in the short run and 0.9 in the long run. If the price of heating oil rises from $1.20 to $1.80 per gallon, the quantity of heating oil demanded will_________ by % in the short run and by % in the long run. The change is__________ in the short run because people can respond_________ easily to the change in the price of heating oil.

Answer 1

If the price of heating oil rises from $1.20 to $1.80 per gallon, the quantity of heating oil demanded will fall by 4% in the short run and by 36% in the long run. The change is smaller in the short run because people can respond less easily to the change in the price of heating oil.

Step-by-step explanation: