Due to inflation in Australia in December 2019, the price for petrol increased from AUD 1.35 to AUD 1.45. This caused petrol consumption to decrease from 2500 liters to 2450 liters at a 7-Eleven Petrol Station in Sydney. Also, when the price for Hyundai 7.5kW Inverter Split System Air Conditioner (Reverse Cycle) increased from AUD 950.00 to AUD 990.00; demand for these air conditioners fell from 2500 units to 2000 units. Following this condition, answer the questions below. i. Using the mid-point formula calculate the price elasticity of demand for petrol and Hyundai 7.5kW Inverter Split System Air Conditioner (Reverse Cycle). ii. Is the price elasticity of demand: elastic, unit elastic, or inelastic for each commodity (petrol and Hyundai 7.5kW Inverter Split System Air Conditioner (Reverse Cycle)? iii. Suppose the government decides to increase tax for petrol and Hyundai 7.5kW Inverter Split System Air Conditioner (Reverse Cycle). Use two diagrams to explain the incidence of the tax increase for each commodity.
Due to inflation in Australia in December 2019, the price for petrol increased from AUD
1.35 to AUD 1.45. This caused petrol consumption to decrease from 2500 liters to
2450 liters at a 7-Eleven Petrol Station in Sydney.
Also, when the price for Hyundai 7.5kW Inverter Split System Air Conditioner (Reverse
Cycle) increased from AUD 950.00 to AUD 990.00; demand for these air conditioners
fell from 2500 units to 2000 units.
Following this condition, answer the questions below.
i. Using the mid-point formula calculate the price elasticity of demand for petrol
and Hyundai 7.5kW Inverter Split System Air Conditioner (Reverse Cycle).
ii. Is the price elasticity of demand: elastic, unit elastic, or inelastic for each
commodity (petrol and Hyundai 7.5kW Inverter Split System Air Conditioner
(Reverse Cycle)?
iii. Suppose the government decides to increase tax for petrol and Hyundai 7.5kW
Inverter Split System Air Conditioner (Reverse Cycle). Use two diagrams to
explain the incidence of the tax increase for each commodity.
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