Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 21

The owner of a small chain of gasoline stations in a large Midwestern town read an article in a trade publication stating that the own-price elasticity of demand for gasoline in the United States is -0.2. Because of this highly inelastic demand in the United States, he is thinking about raising prices to increase revenues and profits. Do you recommend this strategy based on the information he has obtained? Explain.