Suppose You Are Advising the Government on Changes in the Gasoline

Multiple Choice

Suppose you are advising the government on changes in the gasoline market. The current price is
$1.00 per litre and the quantity demanded is 2.5 million litres per day. Long- run price elasticity of demand is constant at 0.8. If the supply of gasoline is reduced so that the price rises to $1.50 per litre, then quantity demanded is predicted to fall in the long run by

A) 32 percent, and total expenditure will rise.
B) 50 percent, and total expenditure will rise.
C) 15 percent, and total expenditure will fall.
D) 15 percent, and total expenditure will rise.
E) 12 percent, and total expenditure will fall.