Part 1 - Article Analysis - Read the article excerpt and answer the questions. "The U.S. average retail price per gallon of regular motor gasoline has fallen 28% from its 2014 peak of $3.70 per gallon...to $2.68 per gallon. However, this price decline may not have much effect on automobile travel, and in turn, gasoline consumption... EIA's Short-Term Energy Outlook (STEO) uses a price elasticity of -0.02 to estimate and forecast consumption of motor gasoline, while also considering anticipated changes in travel demand and fuel economy... Price elasticities can be difficult to interpret, as demand can change for reasons beyond changes in fuel price, including changes in other economic factors." https://www.cia.gov 1. Is the demand for gasoline perfectly elastic, relatively elastic, unit elastic, relatively inelastic, or perfectly inelastic? Use information from the article to support your answer. 2. According to this article, the price of gasoline would need to fall by what percent to increase gas consumption by 1%? Show your work. 3. Why is it difficult to calculate the precise elasticity of demand for gasoline? Explain using an example. 4. Suppose that a 20% decrease in the price of electric cars resulted in a 10% decrease in the quantity demanded of gasoline. Calculate the cross-price elasticity of demand coefficient for electric cars and gas and identify if they are substitutes or complements. 5. Suppose, instead, that a 10% decrease in the price of gas resulted in a 12% increase in the quantity demanded of gasoline powered cars. Calculate the cross-price elasticity of demand coefficient for gas and cars and identify if they are substitutes or complements. 6. Suppose incomes increased by 10% and that gasoline consumption increased by 20%. Calculate the income elasticity of demand coefficient for gasoline and identify if it is a normal good or an inferior good. 7. Assume that the cross-price elasticity of demand coefficient between cars and planes is 0. Does this make them substitutes, complements, or something else. Explain.Part 2 - Practice- Answer the questions. Be sure to explain or show your work. 8. The price of good E increases by 10% and the quantity supplied increases by 20%. Calculate the price elasticity of supply coefficient. Show your work. 9. Given your answer to question 8, is the supply for good E perfectly elastic, relatively elastic, unit elastic, relatively inelastic, or perfectly inelastic? Explain how you determined your answer. 10. When the price of good C increases from $20 to $25 the quantity supplied increases from 100 to 105. Calculate the price elasticity of supply coefficient. Show your work. 11. Given your answer to question 10, is the supply for good C perfectly elastic, relatively elastic, unit elastic, relatively inelastic, or perfectly inelastic? Explain how you determined your answer. 12. Suppose that good O and good N are complements. If the price of good O increases by 10%, what will happen to the demand curve of good N? 13. The price of good R rises by 10% and the quantity demanded of good O decreases by 20%. Calculate the cross-price elasticity of demand between good R and good O. Show your work. 14. Given your answer to question 13, are good R and good O complements, substitutes, normal goods, or inferior goods? Explain how you determined your answer. 15. Suppose that Avery's income increased by 25% and his purchase of good C increased by 75%. Calculate the income elasticity of good C. Show your work. 16. Given your answer to question 15, is good C a complement, substitute, normal good, or inferior good? Explain how you determined your answer. 17. Joel's income increased by 25% and his purchase of good K decreased by 25%. Calculate the income elasticity of good K. Show your work. 18. Given your answer to question 17, is good K a complement, substitute, normal good, or inferior good? Explain how you determined your answer. 19. Read the message created by the names of the goods above. What is the name of the last good
