Elasticity Of Demand For Gasoline Harvard Case Solution & Analysis

The per capita Gasoline consumption has risen steadily from the period from 1999 to 2010. The only variability was seen in 2008’s economic turmoil. The gas consumption curve has been at a 45 degree showing that the consumption has been increasing at a constant rate. Also, the political turmoil of 2001-2005 didn’t deteriorate per capital Gasoline consumption, showing that the US citizen sensitivity didn’t have any effects on situations like 9/11 or war with the Middle East.

Root MSE2.72675R-Square0.0059
Dependent Mean4.87500Adj R-Sq-0.1598
CoeffVar55.93333 

 

Parameter Estimates
VariableLabelDFParameter
Estimate
Standard
Error
t ValuePr > |t|
InterceptIntercept15.156041.775902.900.0272
JulyJuly1-0.068130.36156-0.190.8567

The regression analysis between Gasoline consumption and month of July doesn’t possess a relationship as its R-sq. is extremely weak at 0.0059 showing no relationship. A change in the month would not have a significant effect on the gasoline consumption.

Parameter Estimates
VariableLabelDFParameter
Estimate
Standard
Error
t ValuePr > |t|
InterceptIntercept15.156041.775902.900.0272
JulyJuly1-0.068130.36156-0.190.8567

The regression equation shows that if the factor of July month is removed, people would still consume $5.15 of the gasoline.

Dummy Variables

Root MSE3.06976R-Square0.0059
Dependent Mean4.12500Adj R-Sq-0.1598
CoeffVar74.41831 

 

Parameter Estimates
VariableLabelDFParameter
Estimate
Standard
Error
t ValuePr > |t|
InterceptIntercept14.545962.483651.830.1169
FebruaryFebruary1-0.086350.45825-0.190.8567

 

The R-squ of 0.0059 shows that there is no relationship between gasoline consumption and February. This means that any change from month of February to another month won’t have any effect on the gasoline consumption.

(Feb)

The regression equation shows that if the month or dummy variable is removed from the equation the total gasoline consumption will be $4.54.However, for the month of February, the consumption reduces to $0.086.

Conclusion

The changes in the prices of Gasoline and similar changes to the income of the people creating an impact on the demand for Gasoline in the US; is the primary issue that the policymakers are concerned about. The demand for Gasoline further helps in developing policies regarding an enhanced tax system. It will be up to the measure of demand that proper environmental strategies will be implemented across the US. Therefore, the study has been conducted to determine the sensitivity of the US consumption of Gasoline depending upon the structural behavioural factors..........

 

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