The Price Elasticity of Demand for Gasoline in the Long

question 40

Multiple Choice

The price elasticity of demand for gasoline in the long run has been estimated to be -1.5.If an extended war in the Middle-East caused the price of oil (from which gasoline is made) to increase and remain high for a decade, how would that affect total expenditures on gasoline in the long run, all other things unchanged?

• A) total expenditures would rise
• B) total expenditures would fall
• C) total expenditures would remain unchanged
• D) not enough information is given to answer the question

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Definitions:

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