Question 13 0/2.5 pts In 2014 the U.S. Department of Energy reported that it est

Question

Question 13 0/2.5 pts In 2014 the U.S. Department of Energy reported that it estimated that the average household would spend about $750 less on gasoline in 2015 compared to 2014 as a result of the decline in the price of crude oil. Given this information, it may be concluded that for the average household: i. demand is price elastic within the range over which the price of gasoline has varied (e.g., between $3 and $2 per gallon) ii. demand is price inelastic within the range over which the price of gasoline has varied (e.g., between $3 and $2 per gallon) ii. if expenditures on gasoline decrease, then seller revenues from gasoline sales to the household will also decrease You Answered i and ili Correct Answer ii and ii

Explanation / Answer

The right answer is the last option: ii and iii

Explanation: In case of inelastic demand, the % change in demand is lower than the % change in price. The total expenses on gasoline by households reduces as a result of a decline in the price of gasoline. This means the % change in quantity demanded gasoline is lower than the % fall in price. So, gasoline demand is inelastic.

In case of inelastic demand, revenue decreases when the price is decreased.

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