Given the demand and supply functions of the coal market,

= 120 3 + 4 6 + 0.1

= 10 + 2 0.3 1.5 4

Pcm = 8; Pk = 3; Pl = 2; Pnr = 5; Psb = 6; Y = 1200; Psm = 4

1)Based on the above demand function given find price elasticity of demand. Given Pc = $45.

2) If a coal tax increased coal price 12%, the demand elasticity was -0.4 in the short run, and coal consumption was 500 million tonnes (before the price change). Find the new consumption after the price change.