Column B lists the tax rate per liter in the home currency. For example, in France, the currency is the euro, so from the table we see that the gas tax in France equals .812 euro per liter. Column C lists the price of gas in that country in that month. Column D lists the exchange rate in that month between the dollar and the home currency. For example, to buy one euro in Dec 2009, one would need $1.46 (rounding $1.458 to two decimals). Your first task is to convert the tax and price variables to dollars per gallon, filling in the yellow box in rows 24 to 31, columns B and C. To convert liters to gallons, use the fact that there are 3.785 liters in one gallon. To convert the home currency to $US, use the exchange rate.

1. The tax per gallon of gas in Germany equals (round to 2 decimal places) 2. From the slope of the regression line, we can see that, on average across countries, a one dollar increase in the gas tax is associated with an increase of ____ in the price consumers pay for gas. (Round to 2 decimal places.) 3. This analysis shows that the primary factor accounting for differences in gas prices across countries is differences in taxes. true or false

We turn next to consumption data. Column H lists consumption of gasoline in 1,000s barrels of per day and column I lists population in 1,000s of people. Your next task is to convert the consumption data into gallons per person per day, filling in column B, rows 40 to 47. To convert barrels into gallons, use the fact that one barrel is equivalent to 42 gallons. Next paste the price data from column C, rows 24 to 31, to rows 40 to 47 in the same column. The last step is to create a scatter plot of consumption and price data and to include the regression line. Put price on the vertical axis and consumption on the horizontal axis.

4. On average, one person in the United States consumes _____ gallons of motor gasoline per day. 5. In contrast, one person in Germany on average consumes ____ gallons per day. 6. The slope of the regression line is _____. (Hint: you need to fill in a negative number.) 7. Suppose we accept the premise that the relationship you have plotted traces out a long run demand curve for gasoline. From this figure, we can then conclude that the long-run demand for gasoline is perfectly inelastic.

Exchange Rate Dec 2009 ($US to buy one unit of home Consumption of Motor Gasoline (1,000s of Barrels per Day in 2008) Population 2008 (1,000s of people) Gasoline Tax Dec Gasoline Price 2009 (per Dec 2009(per liter in home liter in home currency.) Country Canada France Germany Italy Japan Spain UK USA currency) Currencycurrency) 0.973 Can $ 1.255 Euro 1.299 Euro 1.278 Euro 0.949 1.458 1.458 1.458 0.011 1.458 1.623 1.000 720.6 207.8 474.9 265.6 982.8 148.3 380.0 8989.2 33,095.0 61,840.3 82,772.2 58,851.3 127,567.9 44,310.9 61,411.7 304,228.3 0.318 0.812 0.862 61.840 0.584 0.703 0.106 126.940 Yen 1.068 Euro 1.081 Pound 0.690 USA $ Sources December, 2009, (downloaded from http://www.iea.org/stats/surveys/mps.pdf, January 2010) Independent Statistics and Analysis downloaded Aug 26, 2010 from http://tonto e adoe.gov/ fapps/ pdbprojectiedindex3.cfm?tid=5&pid-62&aid-2&C de&syid-2004&eyid-2008&unit=TBPD) (downloaded Aug 26, 2010 from http://stats.oecd.org/lndex.aspx) Data on end use taxes and gas prices per liter is from International Energy Agency, "End-use Peteroleum Product Prices and Average Crude Oil Import Costs," Data on Consumption of Motor Gasoline is from, U.S. Energy Information Administration, Data on Gross Domestic Product and Population is from OECD.Stat Extracts, "Country Statistical Profiles 2010," Part 1: Gas Taxes and Gas Prices Gasoline Tax ($US er gallon Gasoline Price $US per gallon Country Canada France Germany Italy Japan Spain UK USA