Richard White, CFA, has been analyzing the price elasticity of demand for gasoline. The gasoline demand curve is steep, but does slope normally. White has measured the elasticity of demand at several different price levels, and has concluded that the price elasticity is higher when demand is low, and lower when demand is high. The most likely justification for thie result is that: A. consumers alter their behavior when price increases endure for longer period os time B. gasoline retailers practice price discrimination C. gasoline producers are price takers D. elasticity typically changes at different levels of demand . . . . . It took me a while because none of them really seemed like justification for the different levels of elasticity. The answer is D…but isn’t that just restating the observation as opposed to giving the justification for why it happens. There are the questions that kill me.
If you look at a straight line, you will see the elasticity is different in the middle than on top or bottom, so I guess here they are trying to say that White’s observation is not very smart.
a strange one. ABC don’t apply at all. D is what happens in a oligopoly which is what the gasoline industry is. Seems to basically be restating the question, but that doesn’t mean it’s wrong.