Question 9

a. Suppose Nil always spends $100 on petrol. Determine Nil's demand function.

Draw the demand curve and show in a diagram the $100 he spends for different amounts of petrol that he consumes. Calculate Nil's price elasticity of demand and the marginal revenue that the petrol station earns from Nil by selling an extra litre of petrol. Explain how your finding is consistent with the relationship between price elasticity of demand and the total revenue.

b. The petrol tank's capacity of Nil's car is 40 litres. He always fills up the petrol tank whenever it is almost empty. Draw Nil's demand curve and determine his price elasticity of demand.

Please show calculation and give curve