If the price elasticity of demand for gasoline is 0

Economics Jan 19, 2021

If the price elasticity of demand for gasoline is 0.20:

a. the demand for gasoline is linear.

b. gasoline is elastic.

c. gasoline is inelastic.

d. gasoline is perfectly elastic.

e. gasoline is an inferior good.

Expert Solution

If the price elasticity of demand for gasoline is 0.20, gasoline is inelastic.

The price elasticity of demand (PED) is inelastic if the PED coefficient is less than 1 in absolute value. Since the price elasticity of demand for gasoline is 0.20, which is less than 1, gasoline is inelastic. There is no information showing that it is a linear demand or an inferior good.

Therefore, c is the correct option.

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