Suppose the market demand function for gasoline is given by: Q = 110 0.5p + 0.2Y where p is the price of gasoline and Y is income.

(a) What is the demand curve if Y = 100?

(b) Draw the demand curve.

(c) What is the price elasticity of demand if Y = 100 and p = 60? What does this number mean?

(d) What is the income elasticity of demand if Y = 100 and p = 60? What does this number mean?

(e) What do you predict the change in the quantity of gasoline demanded (in units) will be if price increases by 12 (i.e. a 20% change)?

(f) If Y = 100, at what price is the price elasticity of demand equal to -1? Show this point on your graph above.

(g) If Y = 100, what is total revenue if the price is p = 60? What is total revenue if price is p = 130? Which one is larger? How does this relate to your elasticity calculations above? Show the revenue areas on your graph above