Why the tepid response to higher gasoline prices? Most studies report that when U.S. gasoline prices rise by 10 percent, the quantity purchased falls by 1 to 2 percent. In September 2005, the retail gasoline price was $2.90 a gallon, about $1.00 higher than in September 2004, but purchases of gasoline fell by only 3.5 percent.
Calculate the price elasticity of demand for gasoline implied by what most studies have found.