Question

If a 30 percent decline in the price of gasoline leads to a 15 percent rise in the quantity of gasoline being bought by consumers, the price elasticity of demand for gasoline in this range must be

Answer 1

Answer: 0.5 making the demand for gas to be inelastic in this range.

Explanation:

The price elasticity of demand is calculated as:

= % change in quantity demanded / % change in price

= 15% / -30%

= -0.5

Based on the above calculation, we can see that the elasticity of demand equals to 0.5. Since, it is less than 1, it is said to be inelastic.