You are given the following data on P* and Q* for gasoline both before and after the imposition of a per gallon tax on producers in the local market for gasoline:

Before the Tax: P* = $3/gallon ; Q* = 40 gallons

After the Tax: P** = $4/gallon : Q** = 35 gallons

a. Calculate (using the point elasticity form with the "Before" data as your original) the price elasticity of demand for gasoline in this local market.

i. The point elasticity of demand for gasoline in this local market is: a. -0.375 b. -1 c. -0.2 d. -2.67

b. Using this elasticity value, fit the given data into a linear demand function. ii. Using this elasticity value, the linear demand function would be: a. QD = 35 - 5*P b. QD = 40 - 2*P c. QD = 55 - 5*P d. QD = 35 - 2*P

c. Suppose this per gallon tax on producers raises $105 in tax revenue for the government . From this, what can we conclude about the price elasticity of gasoline supply and of the relative burdens of this per gallon tax? iii. We can conclude from this information that gasoline supply is price ___________, and the ___________ bears the relatively larger burden of this tax. a. Elastic ; consumer b. Elastic ; producer c. Inelastic ; consumer d. Inelastic ; producer

d. Again using the point elasticity form with the "Before" data as your original, the elasticity of supply in this gasoline market would be: a. 0.375 b. 0.5 c. 1.5 d. 0.1875