Respuesta :
Answer:
If the price of heating oil rises from $1.20 to $1.80 per gallon, the quantity of heating oil demanded will fall by 5% in the short run and by 45% in the long run. The change is smaller in the short run because people can respond less easily to the change in the price of heating oil.
Explanation:
To fill in the gaps, we first calculate the following:
Price elasticity = - Percentage change in quantity demanded / Percentage change in price
Therefore,
Percentage change in quantity demanded = - (Price elasticity * Percentage change in price)
Percentage change in price = ($1.80 - $1.20) / $1.20 = 0.50, or 50%
Since as price of heating oi increases, the quantity demanded will fall making the percentage change in quantity demanded to be negative. Therefore, we have:
Short run price elasticity of demand for heating oil = - 0.1
Long run price elasticity of demand for heating oil = - 0.9
As a result, we have:
Short run percentage change in the quantity of heating oil demanded = - 0.1 * 0.50 = 0.05, or -5%.
Long run percentage change in the quantity of heating oil demanded = -0.9 * 0.50 = -0.45, or -45%.
Therefore, we have:
If the price of heating oil rises from $1.20 to $1.80 per gallon, the quantity of heating oil demanded will fall by 5% in the short run and by 45% in the long run. The change is smaller in the short run because people can respond less easily to the change in the price of heating oil.
Answer:
If the price of heating oil rises from $1.20 to $1.80 per gallon, the quantity of heating oil demanded will fall by 4% in the short run and by 36% in the long run. The change is smaller in the short run because people can respond less easily to the change in the price of heating oil.
Explanation:
