Short-Run Inelasticity and Long-Run Elasticity of Oil Demand

A city government introduces a substantial and permanent 50-cent tax on each single-use plastic shopping bag, which was previously provided for free. Which statement best analyzes the relationship between this price change and the quantity of these bags demanded over different time horizons?

Analysis of a Corporate Pricing Strategy

True or False: Following a significant and permanent price increase for gasoline, the percentage decrease in the quantity demanded is likely to be larger in the first month after the price change than it will be two years later.

Consumer Response to Electricity Price Changes

Consumer Response to Utility Price Changes

The price of home electricity rises by 30% and is expected to stay high permanently. Which of the following statements best analyzes why the price elasticity of demand for electricity will be greater two years after the price increase compared to during the first month?

A national government imposes a new, permanent 25% tax on gasoline, causing a significant and lasting price increase. Analyze the following consumer and market reactions by matching each one to the time frame in which it is most likely to occur.

Evaluating a Pricing Strategy Debate

City Traffic Congestion Policy Analysis

A company that sells a patented, highly specialized medication for a chronic condition is considering a permanent 30% price increase. The medication has no direct competitors. Two executives are debating the strategy:

• Executive A argues: "Let's proceed. In the first six months, our revenue will soar. Patients depend on this medication daily and have no other immediate choice, so the quantity demanded will barely drop."
• Executive B argues: "I'm cautious. This price hike could accelerate research and development by other firms to create a substitute. Within a few years, we might face new competition that erodes our market share, or doctors may start prescribing older, less effective treatments more often."

Based on the economic principles of demand over different time horizons, which executive's reasoning best incorporates the potential long-term risks?