Asked by richard chiem on Jul 06, 2024
Verified
Statement I: In the very short run,the demand for gasoline and home heating oil is almost perfectly inelastic.
Statement II: When American consumers traded in their gas-guzzler automobiles for Japanese fuel-efficient cars from the mid-1970s to the mid 1980s,this was an example of how the demand for gasoline had become more elastic in the long run.
A) Statement I is true and statement II is false.
B) Statement II is true and statement I is false.
C) Both statements are true.
D) Both statements are false.
Perfectly Inelastic
A situation where the demand for a product does not change in response to changes in price; the demand curve is perfectly vertical.
Gas-guzzler Automobiles
Describes vehicles that are inefficient in their fuel consumption, typically with lower miles per gallon.
Japanese Fuel-efficient Cars
Automobiles produced by Japanese manufacturers known for their high fuel efficiency and innovative engineering.
- Familiarize yourself with the concept of demand elasticity and the diverse factors that modify its behavior.
- Gain an understanding of the adjustments made in both the short term and the long term due to shifts in supply or demand.
Verified Answer
AS
Amrin SinghJul 08, 2024
Final Answer :
C
Explanation :
Statement I is true because in the very short run, consumers cannot easily change their consumption habits for gasoline and home heating oil, making the demand almost perfectly inelastic. Statement II is true because over time, as consumers had the opportunity to adjust their behavior by switching to more fuel-efficient cars, the demand for gasoline became more elastic, reflecting their ability to respond to changes in gasoline prices.
Learning Objectives
- Familiarize yourself with the concept of demand elasticity and the diverse factors that modify its behavior.
- Gain an understanding of the adjustments made in both the short term and the long term due to shifts in supply or demand.