Question

In May 2015, the average price of gasoline in the United States was $3.45 per gallon, and consumers purchased nearly 15 percent less gasoline than they had during May 2014, when the average price of gasoline was $3.00 per gallon. Based on these figures, from May 2014 to May 2015, the demand for gasoline was

Answer 1

Using percentage formula, % Change in price = $(3.45 - 3) / $3 = $0.45 / $3 = 0.15 = 15%

Elasticity of demand = % Change in quantity / % Change in price = -15% / 15% = -1

Since absolute value of elasticity is 1, demand for gasoline was unit elastic.

[NOTE: Since % Change in quantity is provided, Percentage formula is used for elasticity. But if Midpoint method is needed,

% Change in price = $(3.45 - 3) / $(3.45 + 3) = $0.45 / $6.45 = 0.07 = 7%

Elasticity of demand = % Change in quantity / % Change in price = -15% / 7% = -2.14

Since absolute value of elasticity is higher than 1, demand for gasoline was elastic.

Input the answer on basis of which method of elasticity calculation is required by your question. I've answered using both methods]