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The price elasticity of demand for gasoline in the long run has been estimated to be 1.5.If an extended war in the Middle East caused the price of oil (from which gasoline is made) to increase and remain high for a decade,how would that affect total expenditures on gasoline in the long run,all other things equal?
A) Total expenditures would rise.
B) Total expenditures would fall.
C) Total expenditures would remain unchanged.
D) The information is insufficient to answer the question.
Price Elasticity of Demand
A measure of how much the quantity demanded of a good responds to a change in the price of that good, quantitatively showing how price changes impact consumer demand.
Expenditures on Gasoline
The total amount of money spent by consumers and businesses on purchasing gasoline.
Extended War
A conflict that lasts significantly longer than expected or intended, often involving a protracted struggle or engagement.
- Understand the concept of price elasticity of demand and its calculation.
- Predict the effects of price changes on total revenue and expenditures, given the elasticity of demand.
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Learning Objectives
- Understand the concept of price elasticity of demand and its calculation.
- Predict the effects of price changes on total revenue and expenditures, given the elasticity of demand.
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