Suppose You Are Advising the Government on Changes in the Gasoline

question 80

Multiple Choice

Suppose you are advising the government on changes in the gasoline market.The current price is $1.00 per litre and the quantity demanded is 2.5 million litres per day.Short-run price elasticity of demand is constant at 0.3.If the supply of gasoline is reduced so that the price rises to $1.50 per litre,then quantity demanded is predicted to fall in the short run by

• A)15%,and total expenditure will rise.
• B)15%,and total expenditure will fall.
• C)50%,and total expenditure will fall.
• D)12%,and total expenditure will rise.
• E)13.3%,and total expenditure will rise.

---

Definitions:

Inflation

The speed at which the total price for goods and services escalates, lessening the purchasing force.

Coupon

Represents the interest payment made to bondholders annually or semi-annually, expressed as a percentage of the bond's face value.

Yield To Maturity

The total return anticipated on a bond if the bond is held until its maturity date, taking into account both current interest payments and the bond's price appreciation.

Face Value

The nominal or dollar value printed on a bond or other financial security, representing the amount due at maturity.