Question

Two gas stations stand on opposite sides of the road: rutter's farm store and sheetz gas station. rutter's doesn't even have to look across the highway to know when sheetz changes its price for gas. when sheetz raises the price, rutter's pumps are busy. when sheetz lowers prices, there's not a car in sight. both gas stations survive but each has no control over the price: the mining journal, may 24, 2008.

refer to fact: each of these gas stations has little control over the price of gasoline because:___.

Answer 1

The inelastic demand for gasoline and the characteristics of monopolistic competition mean individual gas stations, like Rutter's and Sheetz, have little control over gas prices.

Step-by-step explanation:

Each of these gas stations has little control over the price of gasoline because of the inelastic nature of the demand for gasoline and the competitive market structure they operate in. Gasoline is considered a necessity for many consumers and thus presents an inelastic demand; individuals need it regardless of price variations, unless they have alternative transportation options. Furthermore, the gas station market is characterized by monopolistic competition where numerous sellers offer similar but not identical products, and the entry of new competitors can significantly influence market dynamics. This leads to a situation where individual sellers, like Rutter's or Sheetz, must accept the prevailing market prices set by the collective actions of many firms or be impacted by changes in demand as a result of suppliers' adjustments or consumer behaviors.