A gas station owner in a large city learned in his microeconomics class that buyers are relatively unresponsive to changes in the price of gasoline. If, based on that assumption, he increases the price of gas at his station:

Question

Arjun Crosby

Business

6 August, 17:23

A gas station owner in a large city learned in his microeconomics class that buyers are relatively unresponsive to changes in the price of gasoline. If, based on that assumption, he increases the price of gas at his station:

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Keely · Answer 1

net revenue tends to increase.

Explanation:

unresponsive to changes in price of gasoline indicates that there will not be any impact on demand of gasoline whatever may be the change in the price.

Hence if gas station owner increases the price of gas, demand will remain same. Therefore, there will net rise in revenue for gas station.

Actually in such cases profit margin also increases as there is not any increase in production cost, per unit profit will increase as there is increase in per unit selling price. Hence it can be also concluded that net profit for gas station owner will also increase