Assignment: Please assist with your knowledge on the problem. My aim is to learn the material, but if even if you can't help with the final answer. So all input is welcome.
Let P = 53-Q be a consumer's long-run (inverse) demand curve for gasoline, and P= 103-2Q be the consumer's short-run (inverse) demand curve, where P is the price of gasoline in dollars, and Q is gallons consumed per month. Given this:
Question 1: What is the consumer's present consumption of gasoline per month, given the current price is $3.0 per gallon?
Question 2: What is the consumer's short-run demand elasticity for gasoline, evaluated at the current price and consumption level?
Question 3: What is the consumer's short-run consumption level for gasoline if a tax is imposed which raises the price of gasoline to $3.50 per gallon?
Question 4: What is the consumer's long-run demand elasticity for gasoline, evaluated at the current price and consumption level?
Question 5: What is the consumer's long-run consumption level, if a tax is imposed which raises the price of gasoline rises to $3.5 per gallon?