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the price elasticity of demand

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Let P = 53-Q be a consumer's long-run (inverse) demand curve for gasoline, and P= 103-2Q be the consumer's short-run (inverse) demand curve, where P is the price of gasoline in dollars, and Q is gallons consumed per month. Given this:

(a)What is the consumer's present consumption of gasoline per month, given the current price is $3.0 per gallon?

(b)What is the consumer's short-run demand elasticity for gasoline, evaluated at the current price and consumption level?

(c)What is the consumer's short-run consumption level for gasoline if a tax is imposed which raises the price of gasoline to $3.50 per gallon?

(d)What is the consumer's long-run demand elasticity for gasoline, evaluated at the current price and consumption level?

(e)What is the consumer's long-run consumption level, if a tax is imposed which raises the price of gasoline rises to $3.5 per gallon?

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Solution provided by:
Manal Elkhoshkhany, MBA
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  • BA, Ain Shams University, Cairo Egypt
  • MBA, California State University, Sacramento
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