Question: 2. After seeing your analysis, Cal decides to lower the price of gas from $2.758 to $2.558 per gallon. After this change, the volume sold

2. After seeing your analysis, Cal decides to lower the price of gas from $2.758 to $2.558 per gallon. After this change, the volume sold increased to 4,400 gallons per day. He asks you to measure his business gains or losses as a result of this price change. Fixed costs are $438 per day.

What is the price elasticity of demand?

Can the demand be characterized as price elastic, price inelastic, or neither?

By how much did revenues increase or decrease as a result of the change in price?

By how much did profits increase or decline? (Profit is revenue minus total cost.)

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