At the beginning of this year daily consumption of gasoline

At the beginning of this year, daily consumption of gasoline in the US amounted to 344 million gallons. It is estimated that for every 10% increase in the price of gasoline, quantity demanded falls by 2.30%. By the end of this year, the price of gasoline is expected to increase by 40 cents from $2.80 per gallon. Based on this information, what is the expected quantity demanded for gasoline at the end of this year? Please specify your answer to one decimal place.

Solution

Increase in gasoline price = 0.40/2.80= 14.29%

Change in quantity = 14.29% * (-2.3%/10%) = -3.29%

quantity demanded for gasoline at the end of this year = 344 million * (1-0.0329) = 332.70