ECONOMICS
SUPPLY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Gasoline consumption will increase by a large amount.
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Gasoline consumption will increase by a small amount.
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Gasoline consumption will decrease by a large amount.
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Gasoline consumption will decrease by a small amount.
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Detailed explanation-1: -The study determined that elasticity of demand for gasoline ranges from 0.21 to 0.75. According to the NBER study, what will happen if a major supplier of oil cuts production, causing the price of gasoline to increase greatly? Gasoline consumption will increase by a large amount.
Detailed explanation-2: -Price elasticity of demand is an economic measure of the sensitivity of demand relative to a change in price. The measure of the change in the quantity demanded due to the change in the price of a good or service is known as price elasticity of demand.
Detailed explanation-3: -Over time, gasoline demand becomes more elastic, as consumers may trade in their cars for more fuel-efficient models or move closer to work, for example, in response to higher gasoline prices.
Detailed explanation-4: -Which of the following BEST explains how the situation shown in the graph affects producers and consumers? It benefits neither, because consumers must pay more and producers must throw out excess supply.
Detailed explanation-5: -Factors that can shift the demand curve for goods and services, causing a different quantity to be demanded at any given price, include changes in tastes, population, income, prices of substitute or complement goods, and expectations about future conditions and prices.