Question

How has the trend toward fuel efficient vehicles affected the elasticity for gasoline? Do you think this trend will continue?

Answer 1

Ans) Elasticity is the responsiveness of quantity demanded to change in price. Elasticity is determined by availability of close substitutes.

Few years back, the demand for gasoline was highly inelastic because people needed gasoline to operate the cars. But with invention of electric cars, people now have substitute to gasoline operated vehicle which has made the demand for gasoline comparative more elastic (however not very significantly).

This trend will continue in future as we see that almost every year some new technology or you can say more efficient alternative fuels are being invented like for eg- electricity vehicles, hydrogen or water operated vehicles may come in future, methane operated vehicles etc.