The chosen industry for this paper is the gasoline industry. This paper will discuss the price of gas, and its affect on the U.S. In the gasoline industry, it is said that the price elasticity of demand is inelastic. This is said about the gasoline industry because with the high price of gasoline, there is still a high demand for gasoline, and there are not a large number of substitutes, which are readily available to use instead of gasoline. Mankiw (2004) stated, "The price elasticity of demand measures how much the quantity demanded responds to a change in price."The substitutes that can be used in the place of gasoline are limited, and have not been developed well enough to mass-produce. Oil and gasoline are the main source of energy in the U.S. The substitutes that can currently be used in the place of gasoline are hybrid cars, solar energy, public transportation, and ethanol.
The illustration that accompanied Marshall's origi...
Perfectly inelastic demand
Perfectly elastic demandThe substitute that is the best as of the current time is the hybrid cars, which run on electricity. These cars reduce the required amount of gasoline needed to drive. The majority of the people in the U.S. think that gasoline is a necessity, which is used everyday. Fuel manufactured from oil is the main resource for driving motor vehicles, and heating homes, which are two of the basic needs of each citizen in the U.S.
The price of elasticity in this industry is elastic since gasoline and crude oil in the U.S. are two major resources required for energy. There is a set of interconnected international and domestic factors, which have caused the price of gas to increase steadily over the last few years, along with the unquenchable demand on a global level, which may keep the prices there for the short term (Tanneeru, 2006). The...