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The Average Price of Gasoline in June of 2008 in the United

question 26

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The average price of gasoline in June of 2008 in the United States was $3.79. This was up by 82 cents from the previous year. Forecasters are expecting a drop in gasoline consumption of about 1% for the first time in 16 years. Even though this is a historic moment what do the figures still demonstrate about the elasticity of demand for gasoline? If the price increases go unabated what is likely to happen to the long-run price elasticity for gasoline and why?


Definitions:

2018 Data

Information or statistics from the year 2018, typically used for analytical or comparison purposes.

Excess Capacity Scenario

A situation in which a company or economy can produce more goods or services than currently being produced without incurring additional costs.

Sales Increase

A rise in the quantity or dollar value of a company's products or services sold over a specified period.

Capacity Level

The maximum output a company can produce and sell with its current resources.

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