- Go to Federal Reserve Economic Data (FRED) portal and construct the line graph and the scatter plot of the Expenditure on Fuels vs Gasoline Prices for time-period 2001-2013 using the step-by-step procedure outlined in the handout “How to Observe Price Elasticity of Demand”.
- Now, imagine yourself as an economic research associate at the United States Department of Commerce. You are tasked to analyze the price elasticity of demand for gasoline since 2001 in order to help the forecasting office to project tax revenues from the new tax structure. You need to answer the questions that forecasting office sent you and prepare an analytical memo for them. Here are the questions:
- What is the relationship between the fuel expenditures and the price of gasoline?
- How does the quantity of fuel expenditures and the price of gasoline move over time? In the same or in opposite directions?
- Compare the slopes of the fuel consumption expenditure and the gasoline price curves during two different economic expansions: 2002-2008 and 2009-2013. Have those slopes changed over time? What does that mean in terms of the price elasticity of demand?
3. Write a 2-page business memo to the Forecasting Office at the United States Department of Commerce detailing your analysis of questions A-C. Remember to include two charts you have constructed (cut and paste them into the memo). Economists like visuals! The memo should be typed in Word and be no less than 500 words and no more than 2 pages. Save you memo in pdf for submission. Use the handout “How to Write a Memorable Memo” to help you structure your memo. Make sure to cite any data or research/popular sources at the end of the memo in the Bibliography section, which should be in the Chicago Author-Date style. The bibliography is in addition to word count and to page-count.