Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Question
Chapter 8, Problem 4SPPA
To determine
To explain:
The effect of tax cut on the price and production of gasoline provided the price is increased suddenly due to the global shortage of the oil.
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Students have asked these similar questions
The demand and supply schedule for coffee are:
a. If there is no tax on coffee, what is the price and how much coffee is consumed?
b. What is the consumer surplus? Show your calculations.
c. What is the price elasticity of demand when the price goes up from $4 to $5 dollars? Is the demand for coffee elastic or inelastic? Explain.
Step 1
Analyze gasoline price hike statistics in the following scenario.
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 1 million barrels to 800,000 barrels.
No viable substitute has been created to replace gasoline.
Step 2
Calculate the price elasticity of gasoline Be sure to show all work.
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 calculation
To show…
Q. Show and describe what would happen to the demand or quantity demanded or
quantity supplied or supply for a good in each of the following cases:
a) a. an increase in the price of a substitute of your product, an increase in the
number of suppliers and an increase in subsidies
I
b) b. an increase in the price of a complement, an increase in input prices and
increasing costs of regulation.
c) c. an increase in income, for a normal good, Freezing weather wipes out wheat
crops in California
Chapter 8 Solutions
Foundations of Economics (8th Edition)
Ch. 8 - Prob. 1SPPACh. 8 - Prob. 2SPPACh. 8 - Prob. 3SPPACh. 8 - Prob. 4SPPACh. 8 - Prob. 5SPPACh. 8 - Prob. 6SPPACh. 8 - Prob. 7SPPACh. 8 - Prob. 8SPPACh. 8 - Prob. 9SPPACh. 8 - Prob. 10SPPA
Ch. 8 - Prob. 1IAPACh. 8 - Prob. 2IAPACh. 8 - Prob. 3IAPACh. 8 - Prob. 4IAPACh. 8 - Prob. 5IAPACh. 8 - Prob. 6IAPACh. 8 - Prob. 7IAPACh. 8 - Prob. 8IAPACh. 8 - Prob. 9IAPACh. 8 - Prob. 10IAPACh. 8 - Prob. 1MCQCh. 8 - Prob. 2MCQCh. 8 - Prob. 3MCQCh. 8 - Prob. 4MCQCh. 8 - Prob. 5MCQCh. 8 - Prob. 6MCQCh. 8 - Prob. 7MCQCh. 8 - Prob. 8MCQ
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