6. Suppose the price elasticity of demand for heating oil is 0.2 in the short run and 0.7 in the long run. (a) If the price of heating oil rises from $1.80 to $2.20 per gallon, what happens to the quantity of heating oil demanded in the short run? In the long run? (Use the midpoint method in your calculations) (b) Why might this elasticity depend on the time horizon?

6. Suppose the price elasticity of demand for heating oil is 0.2 in the short run and 0.7 in the long run. (a) If the price of heating oil rises from $1.80 to $2.20 per gallon, what happens to the quantity of heating oil demanded in the short run? In the long run? (Use the midpoint method in your calculations) (b) Why might this elasticity depend on the time horizon? 7. The Government has decided that the free-market price of cheese is too low. (a) Suppose the government imposes a binding price floor in the cheese market. Draw a supply-and-demand diagram to show the effect of this policy on the price of cheese and the quantity of cheese sold. Is there a shortage or surplus of cheese? (b) Farmers complain that the price floor has reduced their total revenue. Is this possible? Explain () In response to farmer's complaints, the government agrees to purchase all the surplus cheese at the price floor. Compared to the basic price floor, who benefits from this new policy? Who loses