The Short-Run Elasticity of Demand for Gasoline Sold at Gasoline

question 103

Multiple Choice

The short-run elasticity of demand for gasoline sold at gasoline stations is 0.20. If terrorism causes the supply of gasoline to fall, resulting in a 5 percent drop in quantity, and other things remain the same, the price per gallon will increase by:

• A) 4 percent.
• B) 5 percent.
• C) 20 percent.
• D) 25 percent.

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Definitions:

Dissaving

The consumption of funds beyond current income, often leading to the depletion of wealth or the incurrence of debt.

Property Taxes

Taxes paid by property owners, usually calculated based on the value of their real estate holdings, to fund local services like education and infrastructure.

Tax Deductible

Expenses that can be subtracted from gross income to reduce the amount of income subject to taxation.

Home Equity Loans

A type of loan in which the borrower uses the equity of their home as collateral. These loans are often used to finance major expenses.