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a. (Point Elasticity) Find the point elasticity of demand for a consumer with a demand for gasoline given by the function q = 80-10p2p² when the price is $5/gallon.

a. (Point Elasticity) Find the point elasticity of demand for a consumer with a demand for gasoline given by the function q = 80-10p2p² when the price is $5/gallon.

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter5: Elasticity
Section: Chapter Questions
Problem 31CTQ: Economists define normal goods as having a positive income elasticity. We can divide normal goods...
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3. Elasticities For all of the following questions, round your answer to the nearest hundredth. a. (Point Elasticity) Find the point elasticity of demand for a consumer with a demand for gasoline given by the function q = 80 - 10p - 2p² when the price is $5/gallon. b. (Arc Elasticity) Find the arc elasticity of gasoline demand when for a customer who uses 25 gallons of gasoline per week when the price is $1.75 per gallon, and 30 gallons of gasoline per week when the price is $1 per gallon.
Transcribed Image Text:3. Elasticities For all of the following questions, round your answer to the nearest hundredth. a. (Point Elasticity) Find the point elasticity of demand for a consumer with a demand for gasoline given by the function q = 80 - 10p - 2p² when the price is $5/gallon. b. (Arc Elasticity) Find the arc elasticity of gasoline demand when for a customer who uses 25 gallons of gasoline per week when the price is $1.75 per gallon, and 30 gallons of gasoline per week when the price is $1 per gallon.
c. (Cross-Price Elasticity) Suppose your parents' home is heated by oil. When the price of oil is $6 per gallon, and the price of electricity is $0.04 per kilowatt hour (kWh), they use 2 gallons of oil and 650 kWh of electricity, partially because they also use a plug-in space heater. When the price of heating oil decreases to $5 per gallon, they increase thermostat on the oil heater and stop using the plug-in space heater. As a result, they use 5 gallons of oil and 590 kWh of electricity. What is their cross-price elasticity for electricity with respect to heating oil? d. (Income Elasticity) Consider a two-person household in New York, NY that uses window air conditioning units to cool their apartment in the summer. Their monthly income is $8000 and they use 139 kWh each August for air conditioning. One person gets laid off from their job, so their monthly income decreases to $5300. As a result, their air condition usage in August decreases to 104 kWh. What is their income elasticity for electricity used for air conditioning?
Transcribed Image Text:c. (Cross-Price Elasticity) Suppose your parents' home is heated by oil. When the price of oil is $6 per gallon, and the price of electricity is $0.04 per kilowatt hour (kWh), they use 2 gallons of oil and 650 kWh of electricity, partially because they also use a plug-in space heater. When the price of heating oil decreases to $5 per gallon, they increase thermostat on the oil heater and stop using the plug-in space heater. As a result, they use 5 gallons of oil and 590 kWh of electricity. What is their cross-price elasticity for electricity with respect to heating oil? d. (Income Elasticity) Consider a two-person household in New York, NY that uses window air conditioning units to cool their apartment in the summer. Their monthly income is $8000 and they use 139 kWh each August for air conditioning. One person gets laid off from their job, so their monthly income decreases to $5300. As a result, their air condition usage in August decreases to 104 kWh. What is their income elasticity for electricity used for air conditioning?
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