Homework #4 problem #14, from Ch. 4, p. 99 of Case/Fair Principles… (6th ed.) a few problems of my own modifications of problems #5 and 6 from Ch. 6, p. 144 of Parkin Microeconomics (7 th ed.) modifications of problems #5 and 14 from Ch. 5, p. 132–33 of Krugman/Wells Microeconomics (1 st ed.) 14. Studies have fixed the short-run price elasticity of demand for gasoline at the pump at –0.20. Suppose that international hostilities lead to a sudden cutoff of crude oil supplies. As a result, U.S. supplies of refined gasoline drop 10 percent. a. If gasoline was selling for $1.40 per gallon before the cutoff, how much of a price increase would you expect to see in the coming months? b. Suppose that the government imposes a price cieling on gas at $1.40 per gallon. How would the relationship between consumers and gas station owners change? Do this too! Bob is a shoemaker and an economist. He has estimated the following demand curve for his shoes: Q D = 700 – 10P a. Calculate the price elasticity of demand at points A
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