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?

multiple choice

• No - the elasticity of demand for his gas stations is likely much higher (in absolute value) than 0.2.
• Yes - the elasticity of demand for his gas stations is likely lower (in absolute value) than 0.2.
• Yes - since his elasticity is 0.2, a price increase will raise revenues.
• No - since his elasticity is 0.2, a price increase will lower revenues.