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True, false or uncertain? "A permanent decrease in the cost of producing gasoline will lead to...

True, false or uncertain?

"A permanent decrease in the cost of producing gasoline will lead to a greater increase in gasoline sales in the long run than in the short run, but could increase car sales more in the short run than in the long run."

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Answer #1

True.

Increase in the sales of gasoline will be higher in the long run because the impact of reduced cost would be evident in the long run. The elasticity of gasoline would be higher in the long run. As supply and demand will be more elastic in the long run.

The sales of car will be higher in the short run, since the price of gasoline is low therefore, the demand for car will increase in the short run.

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