Suppose You Are Advising the Government on Changes in the Gasoline

question 37

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.Long-run price elasticity of demand is constant at 0.8.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 long run by

• A)12%,and total expenditure will fall.
• B)32%,and total expenditure will rise.
• C)15%,and total expenditure will rise.
• D)15%,and total expenditure will fall.
• E)50%,and total expenditure will rise.

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Definitions:

Molasses Solution

A liquid mixture made by dissolving molasses, which is a thick, sweet by-product of sugar processing, in water.

Selectively Permeable Membrane

A membrane that allows certain molecules or ions to pass through it by diffusion and occasionally specialized processes.

Distilled Water

Water that has been boiled into vapor and condensed back into liquid, removing impurities and minerals.

Mitochondria

Membrane-bound organelles found in the cytoplasm of almost all eukaryotic cells, essential for producing energy via the process of oxidative phosphorylation.