ECONOMICS
ECONOMIC SYSTEMS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Gasoline does not follow the law ofdemand.
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Gasoline has no close substitutes.
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Gasoline is a luxury for mosthouseholds.
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Gasoline takes a large part of theaverage income.
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Detailed explanation-1: -There are many reasons that can make demand for a good inelastic. With gasoline, there are few substitute goods–a good that, if consumed, can reduce the consumption of another good.
Detailed explanation-2: -When the quantity of a good demanded is relatively insensitive to changes in price, the good is said to have a relatively inelastic price elasticity of demand. So, when events happen to change the price of a good, consumers’ demand for that good does not change commensurately.
Detailed explanation-3: -Gasoline is a relatively inelastic product, meaning changes in prices have little influence on demand.
Detailed explanation-4: -Demand for gasoline is inelastic because there are no substitutes available. The number of substitutes available has hurt the business of the United States Postal Service. If a company raises prices on a product with elastic demand, total revenues will probably decrease.