Suppose the price of gasoline and other petroleum products declined sharply. Which of the following will most likely occur as the result of the lower petroleum prices?

Question

Quizplus · Accepted Answer

When the price of gasoline and other petroleum products decline sharply, the demand for larger, more powerful automobiles is likely to increase. This is because lower fuel prices make it less expensive to operate such vehicles, which may not have been financially feasible if fuel prices were high. Conversely, demand for solar heating systems and home insulation products is likely to be less affected by changes in petroleum prices, as these products are not directly related to energy consumption or fuel prices. Finally, demand for gasoline may increase slightly due to lower fuel prices, but this is not the most likely outcome since people are unlikely to significantly increase their driving habits because of slight price changes.

Suppose the Price of Gasoline and Other Petroleum Products Declined