Often, consumer demand for a commodity will depend upon the use of durable goods, such as housing or transportation. In such a case, demand will show a time-varying pattern of response similar to that of supply. A good example is gasoline. In the short run the stock of automobiles is fixed, while in the long run consumers can buy new automobiles or bicycles.
What is the relationship between the time period and the price elasticity of demand for gasoline? Sketch the short-run and long-run demand curves for gasoline.
Show the impact of a decline in the supply of gasoline in both periods. Describe the impact of an oil shortage on the price of gasoline and the quantity demanded in both the long run and t11e short run. State two new rules of demand, (c) and (d), parallel to the rules of supply (c) and (d) discussed in the General Rules portion of Section C above, that relate the impact of a shift in supply on price and quantity in the long run and the short run.