Please don’t give me the answers that are already on chegg! And I want it comput
ID: 1164956 • Letter: P
Question
Please don’t give me the answers that are already on chegg! And I want it computer typed so I can read it and provide the answer with a minimum 10 sentences. THANKS!!!A gas station owner sees a report on TV which states that the number of gallons of gasoline sold in the U.S. has barely dropped, even as the price per gallon has soared in recent weeks. The price elasticity of demand for gasoline is described in the report as "highly inelastic". The gas station owner responds to this report by jacking up the prices at his station by 50 cents per gallon. Sales and revenues at his station plummet in the first month after the price increase, and drop even further in the second month. What factors did this gas station owner fail to consider when he responded to the TV report by aggressively raising his prices?
Explanation / Answer
EThere are many factors which can determine the sales and revenue for the firm. Some of the factors are availability of close substitutes , preference of consumers ,etc . The other most important factor is time period and price elasticity of supply .
Now, we can divide the time period into three parts. 1) Market peroid - In market period supply and demand didn't change at all.
2) Short Run - In short run demand and supply can be changed to a little extent. So in short run there will little change in both supply and demand and hence revenue and sales will change to adjust to market situation.
3) Long run - In long run both supply supply and demand change to a large extent and hence supply and demand changes to large extent and hence revenue and sales will change substantially.