The price of petrol increases by 20% and remains at the new higher level. Which of the following statements is true?
A) Demand for petrol will increase after people adjust to the new higher price.
B) The price elasticity of demand for petrol will not be affected by the change in the price of petrol over the long run.
C) Initially after the price change the price elasticity of demand will be less elastic than it will be a few years after the price change.
D) Initially after the price change the price elasticity of demand will be more elastic than it will be a few years after the price change.

Question

Quizplus · Accepted Answer

Initially, consumers may not change their petrol consumption significantly due to the lack of immediate alternatives, making demand less elastic. Over time, as consumers adjust by finding alternatives or changing habits, demand becomes more elastic.

The Price of Petrol Increases by 20% and Remains at the New