The price elasticity of demand for gasoline is estimated to be -0.2. Two million gallons are sold daily at a price of $3. Use this information to calculate a demand curve for gasoline assuming it is linear
What will be an ideal response?
Elasticity = slope (p/Q), -0.2 = slope (3/2 ).
The slope equals -0.133.
Thus, Q = a - 0.133p or 2 = a - 0.133(3 ).
Solving yields a = 2.399. The demand curve is Q = 2.399 - 0.133p (where Q is expressed in million gallons).
You might also like to view...
Which of the following statements is true of a barter system? a. In a barter system economy, no rates of exchange are defined
b. In a barter system economy, there are as many different rates of exchange as there are pairs of goods to trade. c. In a barter system economy, rates of exchange are expressed in goods per dollar. d. In a barter system economy, rates of exchange are expressed in dollars per good. e. In a barter system economy, rates of exchange are denominated in gold or silver.
Explain why technological progress will, at best, only temporarily allow a perfectly competitive firm to earn an economic profit.
What will be an ideal response?
Suppose economic stability in the United States increases. This will tend to cause which of the following to occur?
A. The demand for U.S. dollars will rise in the foreign exchange market. B. The demand for euros will rise in the foreign exchange market. C. Nothing will change in the foreign exchange market. D. The supply of U.S. dollars will rise in the foreign exchange market.
Explain why the marginal propensity to save and the marginal propensity to consume sum to 1