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Sstudies have fixed the short-run price elasticity for gasoline at the pump at -.20. Suppose that international hostilities lead to a sudden cutoff of crude oil supplies. As a result U.S. supplies of refined gasoline drop and, in equilibrium, the quantity demanded decreases by 40 percent. If gasoline was selling for $3.00 per gallon before the cutoff, what new price would you expect to see in the coming months?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M942899

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