00:01
Okay, so this gas station owner is facing a very common business question.
00:06
Should i raise my prices to make a profit? and we're told that the demand for gasoline is inelastic.
00:13
What does that mean? if i look at the market for gas over here on the left, that means that the demand curve is very steep.
00:20
Very steep.
00:21
And that demand curve says, for example, that if i start off at one particular price, say, p0, and then i raise my price to p1, people are willing to pay a much higher price without cutting back on their consumption.
00:36
You can see that this inelasticity means that there's a very small change in the quantity consumed.
00:43
So this looks like a great business decision.
00:45
The gas is inelastic.
00:47
That means i can raise the price a lot without losing sales.
00:50
So i get a lot more money.
00:52
I don't lose sales...