The Cross Price Elasticity of Demand for Fuel with Respect

question 46

Multiple Choice

The cross price elasticity of demand for fuel with respect to the price of transport (e.g., automobile travel including insurance, etc.) has been estimated to be -0.48.If the price of transport falls by 10 percent in a period, how will that affect the demand for fuel in that period, all other things unchanged?

• A) The demand for fuel will increase by 4.8 percent.
• B) The demand for fuel will increase by 10 percent.
• C) The demand for fuel will not change because many people prefer to ride the subway.
• D) The demand for fuel will fall.

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Definitions:

Bottlenecks

Constraints or impediments in a system that significantly slow down or halt the overall process flow.

Theory of Constraints

A management approach that identifies the most significant limiting factor (constraint) in achieving goals and systematically improves it.

Long-Run Profit

The sustained earning capacity of a company over an extended period, considering both fixed and variable costs.

Non-Value-Added Activity

Processes or tasks that consume resources but do not add value or enhance the product or service from the customer's perspective.