Question

Why is gasoline considered to have inelastic demand?

A. Governments strictly regulate the amount of gasoline, an individual consumer can purchase.


B. Regardless of price, most consumers use the same amount of gasoline in their daily commutes.


C. If price changes, consumers frequently stockpile gasoline.


D. Government sets strict controls on gas prices, meaning prices will be the same everywhere, all the time.

Answer 1

Gasoline is a relatively inelastic product, meaning changes in prices have little influence on demand. Price elasticity measures the responsiveness of demand to changes in price. Almost all price elasticities are negative: an increase in price leads to lower demand, and vice versa