The effect of higher gasoline prices is most likely to:
A. increase the demand for hybrid cars and increase the demand for gas guzzlers.
B. decrease the demand for hybrid cars and decrease the demand for gas guzzlers.
C. increase the demand for hybrid cars and decrease the demand for gas guzzlers.
D. decrease the demand for hybrid cars and increase the demand for gas guzzlers.
Answer:C
The effect of higher gasoline prices is most likely to:
A. increase the demand for hybrid cars and increase the demand for gas guzzlers. B. decrease the demand for hybrid cars and decrease the demand for gas guzzlers. C. increase the demand for hybrid cars and decrease the demand for gas guzzlers. D. decrease the demand for hybrid cars and increase the demand for gas guzzlers.
Explanation: The demand for hybrids likely increases when gas prices rise. Since the short run supply is inelastic, the increased demand causes these cars to sell for markups over sticker price. The demand for larger vehicles, which can be gas-guzzlers, will.