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 supply is P= 4 + (1/4)Qs and demand is P= 58 ―(1/2)Qs. At a glance, can you tell whether supply or demand is more price elastic in equilibrium? How? What does this tell you about who will pay more of a tax on this product?

When tolls on the Dulles Airport Greenway were reduced from $1.25 to $1.05, traffic increased from 15,000 to 20,000 trips a day. Assuming all changes in quantity were due to the change in price, what is the price elasticity of demand for the Dulles Airport Greenway?

1. Suppose the demand for towels and supply of towels are given by the below: QD = 100 - 4P QS = P a. Find the equilibrium price and quantity using demand and supply functions above. b. Plot demand and supply curve on the same graph and point out the equilibrium quantity and price. You should draw each graph precisely with intercepts and slopes. c. Solve for the price elasticities of demand and supply at the equilibrium point. Which is more elastic: demand or supply? Simply explain why. d. Suppose there was a demand shock so that at each price 20 more towels are demanded since consumers want more. Plot the new demand curve on the graph that you derive in part (a). Find the new equilibrium price and quantity. (Hint: You may derive a new demand function by adding a constant to find a new equilibrium price and quantity.)

The supply of wigits is pefectly elastic and the demand for wigits has a price elasticity of 2 and an income elasticity of 1 (a) If income increases by 25 percent then the equilibrium quantity will_____(increase, decrease, not change) by_____percent and the equilibrium price will ____ (increase, decrease, not change) (b) If a 25 percent tax is imposed on wigits then the quantity consumed will_____(increase, decrease, not change) by____percent and the equilibrium price, inclusive of the tax, will increase by____ percent.

Use the concept of Price Elasticity of Demand to explain why the public policy recommendation of raising taxes on cigarettes causes State revenues to rise while also effectively deterring smoking among young people. Be sure to consider availability of substitutes and the effect of the percentage spent of each buyer’s budget when formulating a response. Who bears the brunt of the tax – the consumer or the producer? Are there any potential negative side effects of increasing taxes on cigarettes?

4-3  In each of the following instances, determine whether demand is elastic, inelastic, or unit-elastic. If price increases by 10 percent and quantity demanded decreases by 10 percent, demand is _______. If price decreases by 10 percent and quantity demanded increases by 5 percent, demand is _______.

Consider the following excerpt: "Steve Cannon, CEO of the AMB Group, Blank's holding company, told ESPN that although food and beverage prices ere 50 percent lower in its new Mercedes-Benz Stadium than the prices in the Georgia Dome the previous year, fans spent 16 percent more." If there has been no change in the demand for concessions at football games, which of the following is true? Oa. Demand for concessions is always elastic b. At the initial prices, demand was inelastic. Oc. The demand curve for concessions slopes upwards Od. Concessions are an inferior good

INFO: Yesterday, the price of envelopes was $3 a box, and Julie was willing to buy 10 boxes. Today, the price has gone up to $3.75 a box, and Julie is now willing to buy 8 boxes. What is Julie’s elasticity of demand? _____ (Hint: only a number goes here) Is Julie's demand for envelopes elastic or inelastic? Explain your answer in a complete sentence(s) here:

1. As a transit planner for the city of Miami, you must predict how many people ride the Miami Metrorail and how much money is generated from train fares. According to a recent study, the short-run elasticity of demand for Metrorail is 0.62 and the long- run elasticity is 1.59. The current ridership is 50,000 people per day. Suppose the city commission decides to increase fares by 10%. Predict the changes in train ridership over a one-month period and a five-year period. ANS: b. Over the one-month period, will total revenue increase or decrease? What will happen in the five-year period? ANS