Question

Problems and Applications Q9

Two drivers—Kenji and Lucia—each drive up to a gas station. Before looking at the price, each places an order. Kenji says, “I'd like 10 gallons of gas.” Lucia says, “I'd like $10 worth of gas.”

Which of the following statements is correct? Check all that apply.

Lucia's demand is perfectly elastic.

Kenji's demand is more elastic than Lucia's.

Kenji's demand is perfectly inelastic.

Lucia's demand is more elastic than Kenji's

Answer 1

The first statement applies. Lucia's demand is perfectly elastic. Since she wants to buy gas worth 10 dollars, she is not willing to spend more money to get more gas. She only wants gas worth a certain amount, irrespective of the quantity she gets, this makes her demand elastic. This would mean that if the price is more than 10 dollars, she may not be willing to buy gas.

The second statement that Kenji's demand is more elastic does not apply. This is because Kenji's demand is inelastic as he wants a certain quantity of gas irrespective of the price of gas.

The third statement applies. Kenji's demand is perfectly inelastic. Since Kenji said he would want 10 gallons of gas without looking at the price, his demand is perfectly inelastic. This would mean he would buy 10 gallons of gas irrespective of the price of gas. Perfectly inelastic demand is when the quantity demanded does not change with price.

The fourth option also applies. Lucia's demand is more elastic than Kenji's. This is because if the price of gas exceeds 10 dollars, Lucia may not be willing to buy gas but Kenji wants to buy has irrespective of the price which makes his demand inelastic.