Hi, could someone please help me on this question. I need part a, b and c) answe

Question

Hi, could someone please help me on this question. I need part a, b and c) answered! Thanks!

Question 1:

(a) You are asked to compare and contrast the estimated price elasticity of demand for fuel in two different countries, say the US and the UK. To do so, you have been given the following information.

- Fuel taxes are about 8 times higher in the UK than the US resulting in prices that are 3 times higher.

- UK Vehicles are twice as fuel efficient.

-Automobiles are driven about 20% less per year in the UK

-And per capita vehicle ownership is lower by almost 20% in the UK.

(i) How relevant are these information and how will you use them?

(ii) In light of the above information, what can you say about the price elasticity of automobiles?

(b)  

Explanation / Answer

a) let fuel taxis in US =x , then in UK =8x

Price in UK =3P, US =P and automobiles driven in UK =20% and per capita vehicle ownership is lower by almost 20% in the UK.

i) this information is relevant to find elasticity, as we see that elasticity elasticity in UK =0.2

ii)=> elasticity in UK =0.2 and for US = 0.2*3P/P *x/8x = 0.075

b)fuel elasticity is different as it measures how much variation in consmption of fuel comes from individual, where as over all price elasticity measures, how much percentsge price change results in percentage change in consumption.

c)logic behind this phenomenon is as pif new parking fee is there , most media and people makes this issue sensitive, so it becomes more respondent, but if there is rebate as it is positive for consumers, so it does not have so much effect

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