The elasticity of Demand:
Price elasticity of demand is a measure of customer sensitivity to a shift in the cost of a commodity. The more general term demand elasticity tests the effect of the adjustment on any number of variables, including the price of the commodity.
Answer and Explanation: 1
The elasticity of demand simply measures the responsiveness of the quantity demanded by changes in prices. The price elasticity of demand can be in five main forms;
- Perfectly elastic in demand
- Perfectly elastic demand
- Unit of elastic demand
- Relatively elastic demand for
- Relatively inelastic to demand.
Gasoline depicts a relatively inelastic demand, which means that a price change has very little effect on the quantity demanded. The oil is extracted from crude oil. Recent developments have led to the creation of more and more efficient and much more affordable machines. The dominance of monopolies and the gasoline industry has been relatively reduced, and due to the increased supply of gasoline, its elasticity is slowly shifting to relative elastic demand.
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fromChapter 3 / Lesson 7
Understand what elasticity of demand is and discover different types of elasticity of demand. Learn how it is measured and review the elasticity of demand formula.