Problem
Consider the following data from the gas station down the street from you for the last week of November:
Nov 2018
Price per gallon: $2.79
Gallons sold: 12,500
Nov 2019
Price per gallon: $2.24
Gallons sold: 14,250
a) Explain how you would calculate the price of elasticity of demand for gasoline in detail.
b) Explain how consumer and producer surplus will change as a result of this price change in detail.
c) Explain the elasticity of supply for gasoline. (If prices go up, how quickly would the supply of gasoline increase).
d) Discuss whether you feel the demand for gasoline is elastic, inelastic, perfectly elastic, or unit elastic.