Find the elasticity of demand for a quantity, Microeconomics

The demand curve for gasoline is P = 200 - 10Q.

a.  Find the elasticity of demand for a quantity of 8. Does this number imply that quantity demanded is sensitive to price changes or insensitive?

b.  Suppose the current market clearing quantity sold is 8. The government is considering implementing an increase in the gas tax on each unit of gasoline to raise revenue. Assume that any change in the tax is passed on entirely to consumers in higher gas prices. Why, given your findings in (a), would you argue against an increase in the tax for the purposes of increasing revenue?

 

 

Posted Date: 3/28/2013 5:56:36 AM | Location : United States







Related Discussions:- Find the elasticity of demand for a quantity, Assignment Help, Ask Question on Find the elasticity of demand for a quantity, Get Answer, Expert's Help, Find the elasticity of demand for a quantity Discussions

Write discussion on Find the elasticity of demand for a quantity
Your posts are moderated
Related Questions
Processors of aseptically packaged juice-based beverages must adequately heat their product before packaging it in order to be sure that they have “killed” the microorganisms which

Problems of population census: High Cost of Census: Censuses are supposed to be conducted at a 10 year interval. The high cost of conducting census has made it impossibl

IMF-World Bank Harmony: Bretton Woods institutions work in tandem. World Bank BOP support is not available with a Fund Programme, while a Fund Programme cannot be finalised w

Economics and Ethics : Morality and ethics are powerful motivations to behavior.  Thouh, economists suppose that rationality is a function of demonstrable self-interest.  That mean

when total production fall what,s the status of average product and marginal product


Question: (a) Assume a firm operates in one location but serves on two distinct markets, namely, 1 and 2. The demand functions are: Market 1: P1 = 40 - 0.3 Q1 Market 2:

Slutsky's Theorem: Graphical Presentation  We prove here that own price effect is the sum of own substitution effect and income effect for a price change, which is known

Severe drought hit the coffee industry hard this year; as a result, more people are now switching to tea. The first table below shows the original supply and demand quantities in t

The reaction of nitrogen dioxide with fluorine 2 NO2 + F2 2 NO2F is first order in NO2 and first order in F2. Complete the rate law for this reaction in the box below. Use the f