home economics

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Suppose that 200 gallons of gasoline are demanded at a particular price. If the price drops by 1 percent, the quantity demanded of gasoline increases to 200.5 gallon. which of the following statement is true?
a) The elasticity of demand is equal to 0.5
b) Demand is elastic
c) Demand is enelastic
d)Demand is unit-elastic.
e)Demand is perfectly inelastic.

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  • home economics -

    Gas consumption went up by .5 units or .25%. We say a good is inelastic if the elasticity is less than 1.00 (absolute value). Greater than 1 is elastic, equal to 1 is unit-elastic, Since 0.25%/1.00% is less than one, go with inelastic.

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