Question

Does consumer price elasticity of demand for gasoline depend on geographical region and easily accessible public transportation?

When gasoline prices begin to rise do you believe millions of consumers will have a unitarily elastic demand for gasoline?

Why it will take time for the public to adopt electric automobiles?

How are taxes assessed on a gallon of gasoline?

Answer 1

1. Does consumer price elasticity of demand for gasoline depend on geographical region and easily accessible public transportation?

Elasticity is a responsiveness to change in particular input. If it is price then price elasticity of demand (Ped) means the degree of responsiveness of demand to a change in price which is given by formula:

Ped= %change in quantity demanded/ % change in price

Generally with increase in price, demand goes down. Example- If chocolates become expensive then demanded less.

In this case, good discussed is gasoline. Generally it has inelastic demand as fuel is necessary to run vehicles. With increasing consumerism demand for automobiles is going up and also for gasoline as it comes as complement.

Public transport also needs fuel, however not can act as substitute for demand for gasoline. In areas where cheaper and better public transport is available then demand for gasoline will certainly be elastic but still there will be some demand for gasoline.

In certain areas where terrain is uneven and less availability of efficient public transport, demand fort gasoline will be inelastic as people will have to use high power, less mileage cars.

2. When gasoline prices rise then there will not be unit elastic demand. Unit elastic demand has led value 1, which shows same percentage change in price and quantity demanded. There will benignly elastic or inelastic demand depending on substitutes available or complement pricing.