A service station owner in Prince George, British Columbia, 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.

Question

Quizplus · Accepted Answer

If the owner is 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, it implies that demand is responsive to the change in price. This is the characteristic of an elastic demand where a small change in price leads to a relatively larger change in the quantity demanded. Therefore, if raising the price of gasoline would cause the owner to receive less total revenue, the demand for gasoline is elastic.

A Service Station Owner in Prince George, British Columbia, Was