question archive A large increase in gas prices creates a demand for cars with good gas mileage
A large increase in gas prices creates a demand for cars with good gas mileage
Subject:EconomicsPrice:2.88 Bought3
A large increase in gas prices creates a demand for cars with good gas mileage. It takes months for car company's to make these cars. How do you describe this market for cars? Why?
Choose the correct answer:
A. Inelastic
B. Static
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Demand for cars increases. Thus a shortage occurs at the initial market price. Since Supply cannot be increased, the whole excess demand would be eliminated via increases in the price. Thus, in the short run, the market equilibrium remains unchanged while the price has increases. Thus, the quantity is inelastic. A is rue.
