The price of gasoline rises by 25 percent and remains fixed at the new higher level. Choose the correct statement.
A)The demand for gasoline will increase after consumers adjust their consumption behaviour to the new higher price.
B)The demand for gasoline will decrease after consumers adjust their consumption behaviour to the new higher price.
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)The price elasticity of demand for gasoline will decrease in the future.
E)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 gasoline consumption significantly due to habits or lack of alternatives, making demand less elastic. Over time, as consumers find alternatives or adjust their behavior, demand becomes more elastic.

The Price of Gasoline Rises by 25 Percent and Remains