Problem 3 Taxes, a policy application Suppose that new estimates indicated that the US demand for gasoline was QD = 147 - 12F + Y while the supply of gasoline was estimated to be Qs = 401' where P is the price of gasoline in dollars per gallon, and Y is the median household income in thousands of dollars. In 2022, the US median household income was Medlnczm = $70,000. 1. Use the information above to nd the 2022 US equilibrium price and quantity of gasoline. Illustrate in a graph where you measure price along the vertical axis and quantity along the horizontal axis. 2. In 2022, what was the price elasticity of demand for gasoline? Was the demand for gasoline price elastic or inelastic? 3. In 2022, what was the price elasticity of supply of gasoline? Was the supply of gasoline price elastic or inelastic? Currently, the US and State governments levy an average gasoline tax of 74 cents per gallon (the larger share is imposed at the State level). 4. Given your ndings above, what is the total gasoline tax burden from the various gasoline taxes? What share of this burden falls on consumers? What shares falls on producers? In Europe, in 2022 the average gasoline tax was $2.47. 5. If the US governments raised the gasoline tax by $1.73 to match the average European gasoline tax, by how much would the price of