Which of the Following Statements About the Consumers' Responses to Rising

question 5

Multiple Choice

Which of the following statements about the consumers' responses to rising gasoline prices is correct?

• A)About 10 percent of the long-run reduction in quantity demanded arises because people drive less and about 90 percent arises because they switch to more fuel-efficient cars.
• B)About 90 percent of the long-run reduction in quantity demanded arises because people drive less and about 10 percent arises because they switch to more fuel-efficient cars.
• C)About half of the long-run reduction in quantity demanded arises because people drive less and about half arises because they switch to more fuel-efficient cars.
• D)Because gasoline is a necessity,consumers do not decrease their quantity demanded in either the short run or the long run.

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Definitions:

Indifference Curve Analysis

A graphical representation used in economics to show different combinations of two goods that provide the consumer with the same level of satisfaction or utility.

Inelastic

A situation where the demand for a good or service is relatively unresponsive to changes in price.

Total Revenue

The total amount of money generated by a business from its primary activities of selling goods or services before any expenses are deducted.

Price

The amount of money required to purchase a good or service, often determined by supply and demand dynamics in the market.