Step 1Analyze gasoline price hike statistics in the following scenario.In June 2008, the U.S. retail gas price jumped from $3 to $4 a gallon.This is a 33% increase in price from January 2008.During that time, the total quantity of gasoline purchased fell by 3%.Supplies of gasoline produced also decreased from 1 million barrels to 800,000 barrels.No viable substitute has been created to replace gasoline.Step 2Calculate the price elasticity of gasoline Be sure to show all work.Calculate the price elasticity of demand for gasoline.Calculate the elasticity of supply using the information provided.Calculate the changes in consumer and producer surplus.Because there is no viable substitute for gasoline at this time, what can you say about the cross-elasticity and income elasticity of supply and demand for gasoline?Is the demand for gasoline elastic, inelastic, perfectly elastic or inelastic, or unit elastic? Use the following as a guide for your calculationTo show your work, clearly identify each step in your problem-solving process demonstrating your progress at each stage.Clearly identify your final answer.

* SOLUTION :- From the given information the calculation is given below.

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter7: Consumer Choice And Elasticity

Section: Chapter Questions

Problem 9CQ

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Step 1

Analyze gasoline price hike statistics in the following scenario.

In June 2008, the U.S. retail gas price jumped from $3 to $4 a gallon.

This is a 33% increase in price from January 2008.
During that time, the total quantity of gasoline purchased fell by 3%.
Supplies of gasoline produced also decreased from 1 million barrels to 800,000 barrels.
No viable substitute has been created to replace gasoline.

Step 2

Calculate the price elasticity of gasoline Be sure to show all work.

Calculate the price elasticity of demand for gasoline.
Calculate the elasticity of supply using the information provided.
Calculate the changes in consumer and producer surplus.
Because there is no viable substitute for gasoline at this time, what can you say about the cross-elasticity and income elasticity of supply and demand for gasoline?
Is the demand for gasoline elastic, inelastic, perfectly elastic or inelastic, or unit elastic?

Use the following as a guide for your calculation

To show your work, clearly identify each step in your problem-solving process demonstrating your progress at each stage.
Clearly identify your final answer.

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Elasticity, inelastic, perfectly elastic inelastic, and unit elastic

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