Will revenue for Clemsons athletic department increase or de

Will revenue for Clemson\'s athletic department increase or decrease? Explain. Would you expect different results during a year when the team had a losing record compared to year When the team wins most of the games? Explain. When the price of gasoline increases, customers still buy about the same amount of gasoline for a weeks H the price stays elevated, the quantity purchased begins to decrease Using concepts of pri elasticity of demand, explain this observation

Solution

Q7. Price elasticity of demand provides the precise calculation of by how much the quantity demanded of a good will change due to change in price of a good.

Price elasticity of demand is affected by the time horizon.

In long-run, demand for a good is generally elastic while in short-run, demand for a good is generally inelastic.

Same phenomena applies to gasoline market as well.

In short-run, demand for gasoline is inelastic. This is because, in short-run, time is not enough for consumers to switch to other susbtitutes in case the price of gasoline increases and thus they are compelled to buy same quantity of gasoline even though price of gasoline has increased.

However, in long-run, demand for gasoline is elastic. This is because, in long-run, consumers have enough time to switch to substitutes or alternate fuel technologies in case the price of gasoline increases.

Thus, it is due to different elasticities of demand based on the time horizon that the consumer behaves differently to the increase in price of gasoline.