Can you tell me if the price elasticity of demand (for Questions 1, 2, and 3) should be "Price Elastic, Price Inelastic, or Unit "Price Elastic"
1. Last week, Cal sold an average of 4,000 gallons per day at an average price of $2.658 per gallon. This week, he raised the average price to $2.758 per gallon. His station is now selling an average of 3,600 gallons per day. Fixed Quantity Price costs of operating the gas station are $438 per day. 4000 2.658 3600 2.758 What is the price elasticity of demand? Average Average Can the demand be characterized as price elastic, price inelastic, or neither? 3800 2.708 By how much did revenues increase or decrease as a result of the change in price? % change %% change Elasticity of Demand By how much did profits increase or decline? (Profit is revenue minus total cost.) -10.000% 3.762% -2.658 Elasticity: Price Elastic By how much did revenues increase or decrease as a result of the change in price? (703.20) By how much did profits increase or decline? $ 160.00 Gallons sold Variable Cost (cost per day Price Revenue (price x gallons) Cost per Gallon Fixed cost per Total Cost (Fixed + Daily Profit per unit x volume) day Variable (revenue - all costs) 4000 S 2.658 $ 10,632.00 $ 2.158 8,632.00 3600 2.758 $ 9,928.80 $ 438.00 $ 1,562.00 2.158 $ 9,070.00 $ 7,768.80 $ 438.00 | $ 8,206.80 $ 1,722.00 2. After seeing your analysis, Cal decides to lower the price of gas from $2.758 to $2.558 per gallon. After this change, Answer question 2 below. the volume sold increased to 4,400 gallons per day. He asks you to measure his business gains or losses as a result of Quantity Price this price change. Fixed costs are $438 per day. 3600 2.758 4400 2.558 What is the price elasticity of demand? Average Average Can the demand be characterized as price elastic, price inelastic, or neither? 4000 2.658 By how much did revenues increase or decrease as a result of the change in price? change change Elasticity of Demand By how much did profits increase or decline? (Profit is revenue minus total cost.) 22.222% -7.252% -3.064 Elasticity: Price Elastic By how much did revenues increase or decrease as a result of the change in price? 1,326.40 By how much did profits increase or decline? LS (400.00) Gallons sol Price Revenue (price x gallons) Cost per Gallon Variable Cost (cost Fixed cost per Total Cost (Fixed + per day Daily Profit per unit x volume) day Variable (revenue - all costs) 3600 2.758 $ 9,928.80 |$ 2.158 4400 7,768.80 2.558 | $ 2.158 $ 438.00 | $ 8,206.80 | $ 1,255.20 $ 1,722.00 9,495.20 | $ 438.00 | $ 9,933.20 $ 1,322.00 3. After seeing the result (from question 2), Cal decides to lower his price once again from $2.558 to $2.458 per Answer question 3 below. gallon. Once again, volume sold increases and settles at 4,800 gallons per day. He is worried that any further price Quantity Price cut will cause the discount station across the street to also lower it price. 4400 2.558 4800 2.458 What is the price elasticity of demand? Can the demand be characterized as price elastic, price inelastic, or neither? Average Average 4600 2.508 By how much did revenues increase or decrease as a result of the change in price? By how much did profits increase or decline? (Profit is revenue minus total cost.) change % change Elasticity of Demand 9.091% 3.909% -2.325 Elasticity: Price Elastic By how much did revenues increase or decrease as a result of the change in price? $ 543.20 By how much did profits increase or decline? (320.00) Gallons sol per day Price Revenue (price x gallons) Cost per Gallon Variable Cost (cost Fixed cost per Total Cost (Fixed + Daily Profit per unit x volume day Variable) (revenue - all costs) 4400 $ 2.558 $ 11,255.20 $ 2.158 9,495.20 438.00 | $ 4800 2.458 | $ 9,933.20 | $ 1,322.00 11,798.40 | $ 2.158 $ 10,358.40 |$ 438.00 | $ 10,796.40 | $ 1,002.00
