Question: U.S. drivers are ranked as the least sensitive to changes in the price of gasoline. For example, if the price rose from $3 to $4

U.S. drivers are ranked as the least sensitive to changes in the price of gasoline. For example, if the price rose from $3 to $4 per gallon and stayed there for a year U.S. purchases of gasoline would fall only about 5 percent.
a. Calculate the price elasticity of demand for gasoline. Is the demand for gasoline elastic, unit elastic, or inelastic?
b. Explain how the price rise from $3 to $4 a gallon changes the total revenue from gasoline sales.

Step by Step Solution

★★★★★

3.39 Rating (165 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

a The price rises by 100 and the average price is ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Document Format (1 attachment)

684-B-E-E-P (462).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!

Suppose that exports become more sensitive to changes in the price level in the United States. That is, when the price level in the United States rises, exports decline by more than they previously...

Berkshire Controllers usually finances its engineering projects with a combination of debt and equity capital. The resulting MARR ranges from a low of 4% per year, if business is slow, to a high of...

A. Set up a spreadsheet to illustrate the effects of changing economic assumptions on the demand for Sun best orange juice. Use the demand function to calculate demand based on three different...

The Grip of Gas U.S. drivers are ranked as the least sensitive to changes in the price of gasoline. For example, if the price rose from $3 to $4 per gallon and stayed there for a year U.S. purchases...

Lakefield Corporations oil trading desk buys and sells oil products (crude oil and refined fuels), options, and futures in international markets. The trading desk is responsible for buying raw...

MA3310 Project Project Topic List Topic: Numerical differentiation Topics and skills: Derivatives, calculator While the rules of differentiation allow us to compute the derivative of just about any...

Module 1 Functions and Limits Project Project Topic List Topic: Numerical differentiation Topics and skills: Derivatives, calculator While the rules of differentiation allow us to compute the...

BMW in North America Please study the Harvard Business Case "BMW of North America", and answer the following questions. It is highly recommend that you first go over the online tutorial of "Case...

1. How many segments are there to target from? 2. What segment should Evan target from? 3. Calculate the VIU's (value in use) for each segment Commercializing the Kunst 1600 Dry Piston Vacuum Pump...

BMW in North America Please study the Harvard Business Case "BMW of North America", and answer the following questions. Based on the case description, what is the most important issue faced by BMW in...

Gross profit for April was two-fifths of net sales, and net income was two-sevenths of gross profit. Net income was $4200. (a) What was the gross profit for April? (b) What were net sales for April?

The following General Fund information is available for the preparation of the financial statements for the city of Eastern Shores for the year ended September 30, 2014: Revenues: Property taxes...

Asset retirement obligations liabilities should be reported at: historical value annually adjusted current value. value estimated by the legislature none of the above.

2. Customer response Historical analysis of its mailing discloses a response rate of 2 per cent for annual mail volumes up to 2 million items and then response drops to 1 per cent for volumes above 2...

With a quota of 40 tons a month for the tuna fishing industry, what is the equilibrium price of tuna and what quantity for tuna fishers catch? Is the equilibrium an overfishing equilibrium? The...

34) A car wash services 450 customers in a 6 hours a lovely Saturday moon. The car wash employs 7 washers at STO per hour An appropriate measure of single factor productivity is A) 6-43 cars per...

You plan on going to school for 3 years. This venture will cost $31,793 each year you are in school. If the interest rate is 7%, how much money do you need today to fund this venture? Assuming that...

Chapter 11 Homework Saved 7. Bed & Bath, a retailing company, has two departments--Hardware and Linens. The company's most recent monthly contribution format Income statement follows: 1 Dos...