Question

You're driving through the desert in AZ when suddenly you realize you're nearly out of gas. You coast to a gas station, and the sign says last gasoline for 100 miles. The owner forces you to pay $100 a gallon.

a. True
b. False

Answer 1

While I cannot confirm if the scenario of being forced to pay $100 a gallon is true or false, I can state that gasoline is typically price inelastic, meaning that demand does not significantly decrease with higher prices. A price cap on gasoline could lead to market shortages due to increased demand and insufficient supply.

Step-by-step explanation:

The scenario given where the gas station owner is forcing you to pay $100 a gallon does not directly relate to the educational material, so I cannot definitively determine it as true or false within this context. However, I can engage with the concept of price elasticity described in the reference material. In economics, the price elasticity of demand measures how the quantity demanded of a good is affected by a change in price. Gasoline is often considered inelastic, meaning that consumers will still purchase it regardless of price changes, within reason, because it's deemed necessary for daily operations such as commuting or traveling.

When gasoline prices are high, it can alter driving behaviors, leading some to drive less and purchase less gasoline. However, the degree of these changes will vary depending on individual circumstances and the necessity of vehicle use. If a price cap were introduced at $1.30 per gallon, it might create a shortage in the gasoline market, as the low price could increase demand, while supply may not be able to keep up.

Accordingly, it is critical to consider market forces and consumer behavior when discussing changes in gasoline prices and proposed economic policies like price caps.