Case Scenario:
This is an interesting time to study microeconomics. As you study supply and demand curves, let's think about what is going on with the price of refined automobile gasoline at the pump. (Henceforth we'll just call it gas).
Gas had been a fairly standard example of a relatively inelastic demand curve. Back when gas was $.50 a gallon (do you even remember those days), few of us would use less gasoline if the price increased by $.05/gallon, or use more if the price dropped by dropped by $.05/gallon. We could say that the short-run demand for gas was almost perfectly inelastic.
Then we experienced a massive run-up in prices for gasoline and then a substantial down turn in the price, all in just a four years time.
Q1. Without getting into why gas prices ran up so fast (and mostly back down), what impact did the demand curve for gas have on prices? Usage? When the price was high?
Q2. What do you think the demand curve for gas looks like now?
Q3. Is it mostly a normal sloping demand curve, with some elasticity?
Q4. What do those terms mean, in the context of analyzing and predicting gas prices?