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# Consumption of gasoline

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Suppose that the annual personal income per capita is in the US is \$39,000 in 2008, the price of gasoline is \$4.00/gallon, and the consumption of gasoline per capita is 450 gallons. If per capita personal income is predicted to increase to \$40,200 and the price of gasoline increased to \$4.30 in 2009, is the per capita consumption of gasoline going to increase or decrease? By how much? Show your calculation steps clearly and prove you claim. Assume the income elasticity of oil is .5 and the price elasticity is -.2

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#### Solution Preview

The income elasticity of oil tells us that for every percentage point change in income will result in a change of half a percentage point in the amount of oil purchased. The price ...

#### Solution Summary

The following posting helps with a problem regarding the consumption of gasoline.

\$2.19

## Natural Gas Consumption Controls

Cellulon, a manufacturer of a new type of home insulation, wants to develop guidelines for builders and consumers regarding the effects on natural gas consumption (1) of the thickness of the insulation in the attic of a home and (2) of the outdoor temperature. In the laboratory they varied the insulation thickness and temperature. A few of the findings are:

Monthly Natural Thickness of Outdoor
gas consumption insulation (inches) Temperature
(cubic feet) (&#9702;F)
Y X1 X2
30.3 6 40
26.9 12 40
22.1 8 49

Based on the sample results, the regression equation is:
Y1=62.65 - 1.86X1 - 0.52X2

A). How much natural gas can homeowners expect to use per month if they install 6 inches of installation and the outdoor temperature is 40 degrees F?

B). What effects would installing 7 inches of installation instead of 6 have on the monthly natural gas consumption (assuming the outdoor temp remains at 40 degrees F)?

C). Why are the regression coefficients b1 and b2 negative? Is this logical?

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