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US Gasoline Market Slope Coefficient, Demand Equation

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This file includes annual data on the U.S. Gasoline market from 1953 to 2004.
? Quantity is U.S. Finished Motor Gasoline Product Sold (in Thousands of Barrels)
? Pop is U.S. total population in thousands,
? GasPIndex is the average nominal price for gasoline, in the form of an index,
? Income is a measure of personal consumption expenditures, assuming income is approximately equal to consumption, measured in $,
? PNewCar is the price index for new cars,
? PUsedCar is the Price index for used cars,
? PPublicTr is the price index for public transportation,
? CPId is the consumer price index for consumer durables,
? CPIn is the consumer price index for consumer nondurables,
? PCEIndex is the personal consumption expenditures price index.

3) Predict the sign of each slope coefficient explaining the logic of your predictions.

4) Estimate the demand for gasoline. In a brief report write out the estimated demand equation and show the standard errors of the estimates.

5) Give a one/two-sentence interpretation of each coefficient. Indicating that there is a positive or negative relation is not sufficient. Give a precise interpretation of each coefficient and compare it to your prediction.

6) Based on your equation, predict per capita gasoline purchases in thousands of barrels in 2008. Assume that the gasoline price adjusted for inflation will rise by 40%, while all other variables will remain at 2004 level.

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Solution Summary

Coefficient calculation and explanation of questions.

See Also This Related BrainMass Solution

Finding Equilibrium Price & Quantity, Elasticities

In the following table is data that describe the market for gasoline in a small town. For each given price there is a quantity supplied (QS) and a quantity demanded (QD).

Price QS QD
0.5 30 193
0.6 35 186
0.7 40 180
0.8 45 173
0.9 50 166
1 55 160
1.1 60 153
1.2 65 146
1.3 70 140
1.4 75 133
1.5 80 126
1.6 85 120
1.7 90 113
1.8 95 106
1.9 100 100
2 105 93
2.1 110 86
2.2 115 80
2.3 120 73
2.4 125 66
2.5 130 60

1)Use the date to draw the supply and demand curves. Label the curves completely.
2)Calculate the equilibrium price and quantity in the gasoline market.
3)What would happen if the price goes up to 2.4 ( show graphically )
4) What would happen if the price goes down to 0.7 ( show graphically )
5)Calculate the price elasticity of demand at the equilibrium price using the exact (point) elasticity measure.
6)Calculate the price elasticity of the following ranges

a.Between P=0.5 and P=0.9
b.Between P=2.2 and P=2.5

7)Imagine that the small town introduces trolley service that will allow most of the residents to get around easily. What would you expect to happen to the demand for gasoline in the area? Would it become more or less elastic? Explain.

8)Draw the total revenue curve and show in the graph where are the elastic and inelastic regions.

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