Question

"If the short-term own price elasticity for gasoline is estimated to be -0.6, then long-term own price elasticity is expected to be"

		between -0.6 and negative infinity
		between 0 and -0.6.
		-0.6.
		none of the above.

Answer 1

Time constraint impacts the elasticity of demand for a good in short-run and the long-run.

In short-run, time for consumers to make change in quantity demanded in response to change in price is small and due to this demand remains inelastic.

In long-run, time for consumers to make changes in quantity demanded in response to change in price is greater and due to this demand remains elastic.

So, own price elasticity of demand for oil is inelastic in the short-term but would become elastic in the long-term.

Thus,

The long-term own price elasticity is expected to be between -0.6 and negative infinity.