explain the elasticity of supply for gasoline?
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explain how to measure the price elasticity of demand and supply and the cross-elasticity income elasticity of demand?
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. In a one- to two-page (250-500-word) paper, address the following. 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?
A) The price elasticity of demand for laundry detergent, in general, is likely to be greater than the price elasticity of demand for Gain laundry detergent.
B) The price elasticity of demand for Gain laundry detergent is greater than the price elasticity of demand for laundry detergent in general.
C) The price elasticity of demand for gasoline is greater than the price elasticity of demand for cereal because more people eat cereal than use gasoline.
D) The price elasticity of demand for gasoline is less than the price elasticity of demand for cereal because more people eat cereal than use gasoline.
