Recent research estimates that the short-run price elasticity of demand for gasoline in the U.S. is -0.3, and the long-run price elasticity of demand is -1.4. What happens if the govenment increases the federal gasoline tax?
A) Consumer expenditures on gasoline increase over the short run and long run
B) Consumer expenditures on gasoline decline over the short run and increase over the long run
C) Consumer expenditures on gasoline increase over the short run and decline over the long run
D) Consumer expenditures on gasoline decrease over the short run and long run
C
You might also like to view...
How do you calculate consumer’s surplus? What happens to consumer’s surplus when the price of a commodity rises?
What will be an ideal response?
Which of the following statements best describes the relationship between a stronger currency and exports?
a. A stronger euro discourages exports by a European firm because it makes the costs of production in the domestic currency higher relative to the sales revenues earned in another country. b. A stronger euro encourages exports by a European firm because it makes the costs of production in the domestic currency higher relative to the sales revenues earned in another country. c. A stronger euro discourages exports by a European firm because it makes the costs of production in the domestic currency lower relative to the sales revenues earned in another country. d. A stronger euro encourages exports by a European firm because it makes the costs of production in the domestic currency lower relative to the sales revenues earned in another country.
If the public decides to hold smaller cash balances, this will cause a(n)
A. increase in interest rates. B. decrease in average paychecks. C. increase in nominal GDP. D. increase in velocity.
Define the field of economics known as macroeconomics.
What will be an ideal response?