Question

A service station owner in Staten​ Island, New​ York, was worried that raising the price of gasoline would cause the quantity demanded to fall by so much that he would be in a worse situation than if he did not raise the price. If raising the price of gasoline would cause the owner to receive less total revenue from the sale of​ gasoline, the demand for gasoline is

A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic.

Answer 1

Answer:

A) elastic.

Explanation:

Demand elasticity is a microeconomic concept that aims to measure the sensitivity of demand in the face of price changes. When price goes up and demand goes down a lot, demand is said to be price elastic. When price rises and demand does not change significantly, demand is said to be inelastic to price. Therefore, if the rise in gasoline prices causes a decrease in the entrepreneur's revenue, we say that the demand for gasoline is elastic.