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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. In a two-page paper, address the following. Be sure to show your calculations. 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? Explain your answer and demonstrate clear, insightful critical thinking. Is the demand for gasoline elastic, inelastic, perfectly elastic or inelastic, or unit elastic? Explain your answer and demonstrate clear insightful and critical thinking.

Financial Management, Finance

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