Consider the market for gasoline in a small town outside of Tacoma. The demand for gasoline is given by the demand function QD = 1005P, where QD gives the number of gallons (in thousands) demanded at each P.

a.) At price P= 3, what is the quantity demanded? At price P= 4, what is the quantity demanded?

b.) Draw the demand function QD= 1005P, labeling the axes and including at least 2 points. What is its slope? 1

c.) Does increasing the price from 3 to 4 increase the amount of revenue generated in the market for gasoline? Calculate total revenue at each point to answer.

d.) Based on your answer from c., what can you tell about the price elasticity of demand for gasoline when the price is 3?

e.) Confirm your answer from d. by calculating the price elasticity of demand, D. You may calculate using either the %-change definition or the change-in-QD -over-change-in- P definition.