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The price elasticity of the demand for gasoline is -0.02. The price elasticity of demand for gasoline at Joe’s 66 station is -1.2. Explain what might account for the different elasticities.
Economics:
Economics:
The price elasticity of the demand for gasoline is -0.02. The price elasticity of demand for gasoline at Joe’s 66 station is -1.2. Explain what might account for the different elasticities.
Reason for different elasticity's are to be determined.
Explanation of Solution
When price elasticity is -0.02, it implies change in quantity demanded is indifferent to change in price. This means price elasticity is perfectly inelastic. There will not be significant change in quantity demanded due to change in price.
But in the case of Joe's 66 station, price elasticity of demand is -1.2. This means elasticity is highly elastic...
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