Long run price elasticity of demand for gasoline

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Suppose the long run price elasticity of demand for gasoline is -.60. Assume that the price of gasoline is currently $4.00 per gallon, the quantity of gasoline is 140 billion per year, and the federal government decides to increase the excise tax on gasoline by $1.00 per gallon. Suppose that in he long run the price of gasoline increases by $.50 per gallon after the $1.00 excise tax is imposed.

-Using the midpoint formula, after the tax is imposed, the new quantity of gasoline demanded is how many billion gallons per year?

Reference no: EM13743127

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