question archive Two drivers - Jack and Jill - each drive up to a gas station
Two drivers - Jack and Jill - each drive up to a gas station
Subject:EconomicsPrice:2.88 Bought3
Two drivers - Jack and Jill - each drive up to a gas station. Before looking at the price, each place an order. Jack says, I'd like 10 gallons of gas." Jill says, "I'd like $20 worth of gas."
What is each driver's price elasticity of demand?
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Jack's demand for gas is perfectly inelastic. No matter what the price is, he wants to consume 10 gallons of gas. His demand curve would be represented by a vertical line at the quantity of 10.
Jill's demand for gas us unit elastic. When the price changes, she adjusts her quantity in exact proportion with it so that her total spending stays the same.
