Business, 24.06.2020 03:01 candeegraves8308

Suppose the price elasticity of demand for heating oil is 0.1 in the short run and 0.9 in the long run. If the price of heating oil rises from $1.20 to $1.80 per gallon, the quantity of heating oil demanded will by % in the short run and by % in the long run. The change is in the short run because people can respond easily to the change in the price of heating oil.

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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:

Answer from: viodsenpai

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:

Answer from: Quest

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Answer from: Quest

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Suppose the price elasticity of demand for heating oil is 0.1 in the short run and 0.9 in the long r...

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