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    Developing a Linear Demand Function

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    Task: Develop a linear demand function for the following data:
    Price elasticity = -0.50
    Income elasticity = 1.5
    Price per gallon = $3.50
    Consumption = 10 million barrels per day
    Income = $12 trillion.

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    Solution Preview

    Let the demand function be Q=a+bP+cI
    Where P=Price per gallon (in dollars)
    I=income (in trillion dollars)
    Q=consumption/demand (million barrels)
    a,b,c are constants

    We need to find the values of a,b and c to ...

    Solution Summary

    This solution illustrates how to develop a linear demand function with the help of the information provided.