Help PLEASE! Economics?

Question

Question 1.

Price Quanity Demanded
$25 20
20 40
15 60
10 80
5 100

What is the price elasticity of demand between
a. P = $25 and P = $20?
b. P = $20 and P = $15?
c. P = $15 and P = $10?
d. P = $10 and P = $5?

Question 2.

Price Quantity Supplied
$10 50
8 40
6 30
4 20
2 10
0 0

What is the price elasticity of supply between
a. P = $10 and P = $8?
b. P = $8 and P = $6?
c. P = $6 and P = $4?
d. P = $4 and P = $2?
e. P = $2 and P = $0?

Question 3.

Opponents of increasing the tax on gasoline argue that the big oil companies just pass the tax along to the consumers. Do you agree or disagree? Explain your answer.

Answer 1

Price elasticity (of demand/supply) =

= the absolute (i.e. positive) value of:
% change in quantity (demanded/supplied) / % change in price =

= absolute value of:
[(new quantity - original quantity) / original quantity] /
[(new price - original price) / original price]

So for example, for question1a):
% change in quantity = (40-20)/20 = 1
[i.e. 100%]
% change in price = (20-25)/25 = -0.2
[i.e. a decrease of one fifth or 20%]

price elasticity = abs[1/-0.2] = 5

All the other answers to questions 1 and 2 can be worked out in the same way.

Q.1
a) 5
b) 2
c) 1
d) 0.5

Q.2
a) 1
b) 1
c) 1
d) 1
e) 1

As for question 3, the answer as usual in economics is "it depends" :) On what? Well, price elasticity, right?
Where consumers' price elasticity of demand is
- elastic:
passing the tax on to consumers would result in a decrease in revenues (as consumers would demand a whole lot less oil if they have to pay a higher price) and therefore oil companies would be unlikely to pass the tax on to consumers
- unitary elastic:
passing the tax on to consumers wouldn't make a difference to revenues, therefore oil companies would pass it on
- inelasitc:
yes they would pass it on since raising prices in the inelastic segment of the demand curve increases revenues.

So I suppose your answer depends on how elastic / inelastic you think the demand for oil is. How easily can consumers use something else instead? I think there is a lot of inelastic demand for gasoline - people need their cars to go to work, no other possibility at least in the short term... So that makes it easy for the oil companies to pass extra costs on to consumers.