Answered: The population of Greensboro is…

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 population of Greensboro is approximately 300,000. Suppose the average individual has demand for gasoline QD=38−1.15P where is in $ per gallon and is in gallons per month.

Calculate the individual elasticity of demand if the price is $3.

Calculate the market demand for gasoline for Greensboro.Calculate the market elasticity of demand if the price is $3.

Expert Solution

Step 1

Given

Q_D=38−1.15P

Individual elasticity of demand

Price = $3

$Q_{D} = 38 - 1.15 P P = $ 3 Q_{D} = 38 - 1.15 * 3 Q_{D} = 34.55 Q_{D} = 38 - 1.15 P D i f f e r e n t i a t e w . r . t P \frac{d Q}{d P} = - 1.15 E l a s t i c i t y o f d e m a n d = \frac{d Q}{d P} * \frac{P}{Q} E l a s t i c i t y o f d e m a n d = - 1.15 * \frac{3}{34.55} E l a s t i c i t y o f d e m a n d = - 0.09$

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