What is your best estimate of the elasticity of demand for gasoline? Is it inelastic or elastic? Explain what these terms mean.
Estimate a number. Explain your reasoning underlying your estimate. Does it matter what time frame we are talking about? Based on your estimate, what would be the reduction in gas consumption if the price of gas rose from $3 to $3.30 per gallon? Respond to your classmates' estimates and reasoning.
1 answer:
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Answer:
-11.8%
Explanation:
the key to answer this question is to remember that valuation of a bond depends basically of calculating the present value of a series of cash flows, so let´s think about a bond as if you were a lender so you will get interest by the money you lend (coupon) and at the end of n years you will get back the money you lend at the beginnin (principal), so applying math we have the bond value given by:
so in this particular case that one year later there are 29 years to maturity so we have:
so as we have a higher rate the investment has the next return: