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Suppose the Price of Gasoline in July 2017 Averaged $2

question 49

Essay

Suppose the price of gasoline in July 2017 averaged $2.35 a gallon and 15 million gallons a day were sold.In October 2017, the price averaged $3.05 a gallon and 14 million gallons were sold.If the demand for gasoline did not shift between these two months, use the midpoint formula to calculate the price elasticity of demand.Indicate whether demand was elastic or inelastic.


Definitions:

Nominal Rate of Interest

The rate of interest before adjustments for inflation, reflecting the face-value rate of interest paid on a loan or received from an investment.

Inflation Rate

The percentage increase in the price level of goods and services in an economy over a period of time.

Purchasing Power

The worth of a currency depicted by the quantity of goods or services that can be purchased with one unit of the currency.

Expected Variance

Expected Variance is a statistical measure that captures the anticipated variability or dispersion of returns on an investment.

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