Question

In May 2011, the average price of gasoline in the United States was $3.76 per gallon, and consumers purchased nearly 5 percent less gasoline than they had during May 2010, when the average price of gasoline was $2.79 per gallon. Based on these figures, from May 2010 to May 2011, the demand for gasoline was _______________

Answer 1

The demand for gasoline was inelastic.

Step-by-step explanation:

In May 2011, the average price of gasoline in the United States was $3.76 per gallon.

During May 2010, when the average price of gasoline was $2.79 per gallon.

In May 2011, the consumers purchased 5 percent less gasoline.

Percentage change in price

=
`(3.76 - 2.79)/(2.79)\ *\ 100`

= 34.76%

Price elasticity of demand

=
`(\% \Delta Q)/(\% \Delta P)`

=
`(5)/(34.76)`

= 0.14

Since, the price elasticity is less than 1, it implies that demand was inelastic.