Gas Demand

The average quantity of gas demanded in 2007 was 9.4 million barrels per day while

the price was at $2.93 per gallon. In 2008, the average quantity of gas demanded was 9.0

million barrels per day while the price per gallon rose to $3.81. The difference between the

two years is .4 million barrels less in 2008 and gas is more expensive by .88 cents. The demand

is inelastic because the percentage change in the quantity demanded is less than the percentage

change in price. The quantity demanded dropped .4 million barrels per day because the price

rose .88 cents. The demand was still a lot though at 9.0 million barrels per day and compared to

other years did not drop as much as when the price of gasoline was cheaper. I calculated Ed<1

at 0.0217 for the quantity demanded and 0.1294 for the price so the demand is inelastic so the

percentage demanded is less than the percentage change in price. So with Ed<1.0 the price

went up and the revenues went down. The quantity supplied now exceeds the quantity demanded

in 2008 so the price of gasoline goes down in 2009.

Yes, I think this elasticity finding coincides with my experience. I got about the same

amount of gasoline in 2007 as I did in 2008. I didn't get less gasoline in 2008 because the price

rose .88 cents. I didn't notice the change in gasoline prices and continued to get as much as

I normally did. If I got 288 gallons of gasoline in 2007 at $2.93 I would have paid $843.84.

If I got 288 gallons of gasoline in 2008 at $3.81 I would have paid $1,097.28. That is a

difference of $253.44. Since the demand is inelastic, I would have probably been expected to

pay for less gasoline in 2008 because of the rise in cost with Ed<1 and the quantity demanded at

0.0217 and Ed<1 and 0.1294 for the price. I got the same amount of gasoline in 2008 as I did in

2007 so I was only paying more for the same amount of gasoline because of the price increase. A

graph would show the price of gasoline...