Question

Electric cars, in general, have very tight elasticity of demand. Using the determinants of price elasticity of demand, explain why this is the case.

Answer 1

An inelastic demand or tighter demand is one where a given percentage change in price will cause a smaller percentage change in quantity demanded . Electric cars generally have tigher elasticity of demand due to lack of substitute available for it .

For example - Overall demand for gasoline—at least in the United States—is generally considered relatively inelastic. Americans own cars and trucks, and the country is large and laced with highways. Americans need gasoline because there are few substitutes for it. In fact, the only real substitutes are public transportation, which is not always available, and the electric car, which is still a relatively new technology.