Suppose that the long-run price elasticity of demand for gasoline is 0.55. Assume that the price of gasoline is currently 4.00 per gallon, the quantity of gasoline is 140 billion gallons per year, and the federal government decides to increase he excise tax on gasoline by $1.00 per gallon. Suppose that in the long run the price of gasoline increases by $0.70 per allon after the $1.00 excise tax is imposed. . Using the midpoint formula, after the tax is imposed, the new quantity of gasoline demanded is ear. (Enter your response rounded to two decimal places.) billion gallons per

Suppose that the long-run price elasticity of demand for gasoline is 0.55. Assume that the price of gasoline is currently 4.00 per gallon, the quantity of gasoline is 140 billion gallons per year, and the federal government decides to increase he excise tax on gasoline by $1.00 per gallon. Suppose that in the long run the price of gasoline increases by $0.70 per allon after the $1.00 excise tax is imposed. . Using the midpoint formula, after the tax is imposed, the new quantity of gasoline demanded is ear. (Enter your response rounded to two decimal places.) billion gallons per

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The price elasticity of demand for food tends to be unrelated to per capita wealth. the same in rich and poor nations. lower in richer nations. O higher in richer nations.
4. In order to reduce farm output, raise farm prices, and thus raise farm incomes (revenues), the government pays farmers to set aside a portion of their land from production. Using a graph, explain in terms of the elasticity of demand for farm products why farmers may be better-off when harvests are low even if we ignore the money they receive from the set-aside program.
The following graph shows the demand for a good. PRICE (Dollars per unit) 210-- 135 105 30 0 4 Z I 14 X 18 QUANTITY (Units) I II 28 W Demand ? For each of the regions listed in the following table, use the midpoint method to identify if the demand for this good is elastic, (approximately) unit elastic, or inelastic.
6. The government decides to place a $6 unit tax on a product. The following elasticities are known: E, = - 1; E,= 2. By how much does the price paid by the demanders increase because of this tax?
The quantity demanded of salt decreases when the price of pepper increases. This is an example of * own-price elasticity. supply elasticity. income elasticity. O rubber band elasticity. cross-price elasticity. If the government wants to put a per unit tax on a product so that it can raise revenue to support local schools, it would most likely accomplish this goal by doing which of the following? * O placing a tax on a good with an elastic demand. placing a tax on a good that has many substitutes. placing a tax on a good with an inelastic demand. placing a tax on a good with a perfectly elastic demand. O relying of the goodness of mankind and simply ask for donations.
Suppose that the elasticity of demand for gasoline is -0.20. If world gasoline supplies decrease by 10%, then the price of gasoline will increase by how much? a. 20% Ob. 10% Ⓒc. 50% O d.5%
Explain why the Elasticity value gets smaller as you move down the demand curve. a. As we move down the demand curve, equal changes in quantity represent smaller and smaller percentage changes, whereas equal changes in price represent smaller and snmaller percentage changes, and the absolute value of the elasticity measure declines. b. As we move down the demand curve, equal changes in quantity represent larger and larger percentage changes, whereas equal changes in price represent larger and larger percentage changes, and the absolute value of the elasticity measure declines. c. As we move down the demand curve, equal changes in quantity represent smaller and smaller percentage changes, whereas equal changes in price represent larger and larger percentage changes, and the absolute value of the elasticity measure declines. d. As we move up the demand curve, equal changes in quantity represent smaller and smaller percentage changes, whereas equal changes…
1. If the Greyhound Bus Company expects that a decrease in bus fares on its Manchester-Boston route will raise its total revenues, it must think that the demand for bus travel between Manchester and Boston is: a. elastic b. unit elastic c. inelastic
1. Consider the market for Widgets. Suppose that the equation for the supply curve is: Qs = 1,000P – 10,000, and the equation for the demand curve is: Qa = 50,000 – 2,000P. It turns out that the equilibrium price is 20, while the equilibrium quantity is 10,000. a. Use a 10% increase in quantity to estimate (crudely) both the elasticity of supply and the elasticity of demand at the equilibrium quantity. i) Categorize supply and demand as elastic or inelastic at the equilibrium quantity. ii) Is supply or demand relatively more inelastic at the equilibrium quantity? b. If the government enacted a tax of $3, the loss in consumer surplus would be 9,000, while the loss in producer surplus would be 18,000 (see Homework 2, question #2.) Compare this information to your answer to part (a). Explain. c. Now estimate (crudely) the elasticity of demand at a quantity of 11,000 by decreasing quantity by 1,000. Compare your estimate of elasticity to the estimate in part (a). Comment.
Suppose that both wheat and corn have an income elasticity of 0.1 a. If the average income in the economy increases by 2 percent each year, by what percentage does the quantity demanded of wheat increase each year, holding all other factors constant? Holding all other factors constant, if 10 billion bushels are demanded this year, by how many bushels will the quantity demanded increase next year if incomes rise by 2 percent? b. Given that average personal income doubles in the United States about every 30 years, by about what percentage does the quantity demanded of corn increase every 30 years, holding all other factors constant?
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