Calculate the cross-price elasticity of demand for gas

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1.Suppose that the price of gasoline at a particular station two months ago was $2.80 per gallon (keep it simple-assume one grade of gas). The past month, the price of gas was $3.10 per gallon. Assuming 20,100 gallons were sold two months ago and 20,000 gallons were sold last month, use the point formula to calculate the price elasticity of demand for gas at this station. Based solely on your calculations, is the demand for gasoline elastic or inelastic? If sales of Almond Joy bars at the same gas station's convenience store decreased over the same time frame, what relationship do gasoline and Almond Joy bars have? Do you have enough information to calculate the cross-price elasticity of demand for gas and Almond Joy bars? If so, make the calculation. If not, explain why not. Show all calculations.

2.Suppose credible medical reports reveal previously unknown benefits of eating six-ounce portions of wild salmon, three times per week. These benefits include a significantly extended life span, improved health, a keener mind, and more dates. There are no negative side effects. Furthermore, suppose that these benefits occur only if people drink a four-ounce glass of a particular Languedoc white wine with each serving of the fish. Finally, suppose mad salmon disease (MSD) has reared its ugly head once again and has already infected a significant percentage of the wild salmon population worldwide. Use comparative static analysis to illustrate (that means draw graphs) and describe what should happen to the equilibrium price and quantity in the markets for wild salmon and the Languedoc white wine, given just this information. Be specific but not long-winded.

Reference no: EM131058481

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