Price elasticity of demand for gasoline

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WARD-BUS206 1
Price Elasticity of Demand of Gasoline
Kelly Ward
Summer 2018
Microeconomics BUS206
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WARD-BUS206 2
Elasticity in economics refers to the measure of how much consumers respond to changes
in certain variables, such as price, availability of substitutes, or prices of complements. The price
elasticity of demand measures how much the quantity demanded responds to a change in price
(Mankiw, 2018). In order for the demand of a good to be consider elastic the quantity demanded
responds substantially to changes in the price (Figure 2) (Mankiw, 2018). The demand is said to
be inelastic if the quantity demanded responds only slightly to changes in the price (Figure 1)
(Mankiw, 2018). The price elasticity of demand for any good measures how willing consumers
are to buy less of the good as its price rises (Mankiw, 2018).
In general, if the demand for a good is elastic, you will see a decrease in quantity
demanded when the price rises or vice versa when the prices is reduced, you will see an increase
in quantity demanded. If the demand of a good is inelastic, the quantity demanded does not
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