Suppose that the long-run price elasticity of demand for gasoline is -0.45. Assume that the price of gasoline is currently $4.00 per gallon, the quantity of gasoline is 140 billion gallons per year, and the federal government decides to increase the excise tax on gasoline by $1.00 per gallon. Suppose that in the long run the price of gasoline increases by $0.70 per gallon after the $1.00 excise tax is imposed. a. Using the midpoint formula, after the tax is imposed, the new quantity of gasoline demanded is billion gallons per year. (Enter your response rounded to two decimal places.)

Suppose that the long-run price elasticity of demand for gasoline is -0.45. Assume that the price of gasoline is currently $4.00 per gallon, the quantity of gasoline is 140 billion gallons per year, and the federal government decides to increase the excise tax on gasoline by $1.00 per gallon. Suppose that in the long run the price of gasoline increases by $0.70 per gallon after the $1.00 excise tax is imposed. a. Using the midpoint formula, after the tax is imposed, the new quantity of gasoline demanded is billion gallons per year. (Enter your response rounded to two decimal places.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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