Writing instructions
Writing instructions
In June 2008, the U.S. retail gas price jumped from $3 to $4 a gallon.
This is a 33% increase in price from January 2008.
During that time, the total quantity of gasoline purchased fell by 3%.
Supplies of gasoline produced also decreased from one million barrels to 800,000 barrels.
No viable substitute has been created to replace gasoline.
Step 2
Calculate the price elasticity of gasoline.
In a one- to two-page (250–500-word) paper, in which you show all your work, address the following:
Calculate the price elasticity of demand for gasoline.
Calculate the elasticity of supply using the information provided.
Calculate the changes in consumer and producer surplus.
Because there is no viable substitute for gasoline at this time, what can you say about the cross-elasticity and income elasticity of supply and demand for gasoline?
Is the demand for gasoline elastic, inelastic, perfectly elastic or inelastic, or unit elastic?
Use the following as a guide for your calculations:
Use Microsoft Equation Editor or a similar tool to help you insert mathematical equations and symbols in your response. For further assistance, download the Microsoft Equation Editor Information document.
0 comments