Economists have estimated the demand elasticity for motor fuel to be between 0.4 and 0.85. a. If
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Economists have estimated the demand elasticity for motor fuel to be between 0.4 and 0.85.
a. If the price rises 10 percent and the initial quantity sold is 10 million gallons, what is the range of estimates of the new quantity demanded?
b. In carrying out their estimates, they came up with different elasticity estimates for rises in price than for falls in price, with an increase in price having a larger elasticity than a decrease in price. What hypothesis might you propose for their findings?
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a To calculate the range of estimates for the new quantity demanded we can use the formula NewQuanti...View the full answer
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