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Suppose the Price of Gasoline in July 2004 Averaged $1

question 51

Essay

Suppose the price of gasoline in July 2004 averaged $1.35 a gallon and 15 million gallons a day were sold.In October 2004, the price averaged $2.15 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:

Wage Rate

The fixed amount of compensation or payment provided to an employee by an employer in return for work performed, typically expressed per hour or year.

Utility Maximizer

An individual or entity that seeks to achieve the highest level of satisfaction possible from their consumption choices, given their resources.

Net Seller

An individual or entity that sells more than it purchases in a given market, often resulting in a net inflow of funds.

Net Buyer

An entity or individual that purchases more of a commodity or asset than they sell in a specific period.

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