To determine whether an increase in the price of gasoline results in a consumer spending a larger share of their expenditure on gasoline we need to know

Question

Quizplus · Accepted Answer

To determine whether an increase in the price of gasoline results in a consumer spending a larger share of their expenditure on gasoline, we need to know the own price elasticity of demand for gasoline. This tells us how responsive consumers are to changes in the price of gasoline and whether they will adjust their consumption of it in response to a price increase. If the own price elasticity of demand for gasoline is elastic, then consumers will likely reduce their consumption in response to a price increase, resulting in a smaller share of their expenditure being spent on gasoline. If the own price elasticity of demand for gasoline is inelastic, then consumers will not make significant adjustments to their consumption, resulting in a larger share of their expenditure being spent on gasoline. Therefore, D is the best choice.

To Determine Whether an Increase in the Price of Gasoline