Consider Sam and Linda both drive a relatively inefficient sport utility vehicle (SUV).Sam has a lease that doesn't expire for three years whereas Linda owns her sport utility vehicle free and clear.If the price of gasoline was to increase by fifty percent,which of these statements is most likely true?
A) Linda will have a less elastic response than Sam.
B) Sam will have a less elastic response than Linda.
C) Sam and Linda will have identically elastic responses.
D) Sam will have a more elastic response than Linda.

Question

Quizplus · Accepted Answer

Sam will have a less elastic response than Linda because he is bound by a lease, making it harder for him to change his vehicle or driving habits in response to the increase in gasoline prices. Linda, owning her vehicle outright, has more flexibility to adjust her behavior or vehicle choice.

Consider Sam and Linda Both Drive a Relatively Inefficient Sport