Mr. Abel owns a small chain of gasoline stations in a large Midwestern town. He read an article that said the own price elasticity of demand for gasoline in the United States is -0.2. Because of this highly inelastic demand in the United States, Mr. Abel is thinking about raising prices to increase revenues and profits. He has asked for your opinion.
- Discuss the implications of own price elasticity.
- Discuss the relationship between price changes, revenue, and own price elasticity of demand.
- Interpret the -0.2 own price elasticity of demand.
- Do you recommend that Mr. Abel raise prices?