Question

8. If the price of gasoline across Brevard County gas stations increases by 8% but the quantity of gasoline purchased by Brevard County residents decreases by 2%, then gasoline is:

Answer 1

The answer is Inelastic.

Given,

the price of gasoline across Brevard County gas stations increases by 8%.

the quantity of gasoline purchased by Brevard County residents decreases by 2%.

The change in quantity demanded of a good or service when divided by the price change in percentage form the price elasticity of demand.

Price elasticity of demand = Percentage change in quantity demanded of gasoline ÷ Percentage change in the price of gasoline

Now, substituting the value in the above formula we get,

Price elasticity of demand = 2% ÷ 8%

                                           = 0.25

Since the price elasticity for gasoline is less than 1 gasoline is inelastic in demand.

Hence, If the price of gasoline across Brevard County gas stations increases by 8% but the quantity of gasoline purchased by Brevard County residents decreases by 2%, then the demand for gasoline is inelastic.

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