Let's break down the problem step by step: ### 1. **Price and Quantity Change** - **Current price + tax:** \$1.05 (includes \$0.05 tax) - **Quantity sold:** 10,000 packs/day - **New price + tax:** \$1.26 (includes \$0.26 tax) ### 2. **Elasticity Formula** Price elasticity of demand (\(E\)) is: \[ E = \frac{\%\ \text{change in quantity}}{\%\ \text{change in price}} \] Given \(E = -0.90\) (negative because demand curve slopes down). ### 3. **Calculate % Change in Price** \[ \%\ \text{change in price} = \frac{1.26 - 1.05}{1.05} = \frac{0.21}{1.05} = 0.2 = 20\% \] ### 4. **Calculate % Change in Quantity** \[ \%\ \text{change in quantity} = E \times \%\ \text{change in price} \] \[ \%\ \text{change in quantity} = -0.90 \times 0.20 = -0.18 = -18\% \] ### 5. **Calculate New Quantity Sold** \[ \text{New quantity} = 10,000 \times (1 - 0.18) = 10,000 \times 0.82 = 8,200 \] ### 6. **Calculate New Tax Revenue** - Tax per pack = \$0.26 - Packs sold per day ≈ 8,200 \[ \text{Tax revenue} = 0.26 \times 8,200 = 2,132 \] ### **Final Answers** - **Packs sold:** **8,200** - **Tax revenue:** **2,132** --- **Filled Blanks:** > 8,200 packs of gum will be sold in the city once the new tax is in place, and the city can expect to collect 2,132 dollars of revenue each day from the new tax.