Problem
Economists have estimated the demand elasticity for motor fuel to be between 0.4 and 0.85.
a. If the price rises 10 percent and the initial quantity sold is 10 million gallons, what is the range of estimates of the new quantity demanded?
b. In carrying out their estimates, they came up with different elasticity estimates for rises in price than for falls in price, with an increase in price having a larger elasticity than a decrease in price. What hypothesis might you propose for their findings?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.