The market for gasoline in May is in equilibrium, at a market clearing price of $2.50...

The market for gasoline in May is in equilibrium, at a market clearing price of $2.50 per gallon. After Memorial Day, the demand curve for gasoline increases, which causes

the demand curve for gasoline to shift to the left, creating a shortage at $2.50 per gallon which causes the market clearing price of gasoline to fall.

the demand curve for gasoline to shift to the right, creating a shortage at $2.50 per gallon which causes the market clearing price of gasoline to fall.

the demand curve for gasoline to shift to the right, creating a shortage at $2.50 per gallon which causes the market clearing price of gasoline to rise.

the demand curve for gasoline to shift to the left, creating a shortage at $2.50 per gallon which causes the market clearing price of gasoline to rise.

Other things being equal, a higher price induces

buyers to reduce the amount they want to buy and sellers to increase the amount they are willing to sell.

buyers to increase the amount they want to buy and sellers to reduce the amount they are willing to sell.

buyers to reduce the amount they want to buy and sellers to reduce the amount they are willing to sell.

buyers to increase the amount they want to buy and sellers to increase the amount they are willing to sell.

Solutions

Expert Solution

a) An increase in the demand will shift the demand curve for gasoline to shift to the right, creating a shortage at $2.50 per gallon which causes the market clearing price of gasoline to rise. The answer is "C"..

b) "A"

A higher price in the market, the buyers will reduce the amount they want to buy and sellers to increase the amount they are willing to sell.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Assume the market for gasoline is competitive: What is the market equilibrium price of gasoline?

Demand and Supply for GasolinePriceQuantity Demanded (in gallons)Quantity Supplied (in gallons)13,00012022,80016032,60020042,40024052,20028062,00032071,80036081,60040091,40044010120048011100052012800560136006001440064015200680Assume the market for gasoline is competitive: What is the market equilibrium price of gasoline?If the government imposes a $6/gallon tax on gasoline collected from sellers. After the imposition of the tax, what will be the new market price?If the government imposes a $6/gallon tax on gasoline collected from buyers. After the imposition of the tax, what will be the new market price?Assume that the government imposes a $6/gallon tax...

Let the market for gasoline be in equilibrium. The price of cars see a decrease and...

Let the market for gasoline be in equilibrium. The price of cars see a decrease and at the same time there is a new technology identified known as fracking which allows us to extract crude oil easier than before. Draw a neatly labelled equilibrium diagram and neatly indicate the shifts of the demand and supply curve. What happens to equilibrium price and quantity of gasoline?

1. Suppose there is a decrease in the price of gasoline. With the aid of a demandand-supply diagram, explain how this will affect the equilibrium price and quantity in the market of gasoline cars.

1. Suppose there is a decrease in the price of gasoline. With the aid of a demandand-supply diagram, explain how this will affect the equilibrium price and quantity in the market of gasoline cars. 2. Suppose the market for Japanese grapes is represented by: Supply: Q = 400 + P2 Demand: Q = 1000 – 5P2 i) Find the market equilibrium price and quantity. ii) Calculate the price elasticity of demand when the market is at the equilibrium. Show your...

What happens to the market clearing wage and equilibrium employment if the demand for labor increases?...

What happens to the market clearing wage and equilibrium employment if the demand for labor increases? What happens to the market clearing wage and equilibrium employment if the supply of labor increases? What happens to the market clearing wage and equilibrium employment if the demand and supply of labor increases? What happens to the equilibrium wage and equilibrium employment of a given firm if the demand for product increases? What happens to the equilibrium wage and equilibrium employment of a...

Explain Market equilibrium, equilibrium price, and equilibrium quantity

Price controls are often put in place because the market equilibrium may not fairly distribute goods...

Price controls are often put in place because the market equilibrium may not fairly distribute goods and services. Using the concepts of efficiency, equality, and dead weight loss, explain when price controls are good/bad for society.

4. Price controls are often put in place because the market equilibrium may not fairly distribute...

4. Price controls are often put in place because the market equilibrium may not fairly distribute goods and services. Using the concepts of efficiency, equality, and dead weight loss, explain when price controls are good/bad for society.

“Market-clearing” is a key assumption underlying the Neoclassical Theory of Distribution. What exactly does this “market-clearing”...

“Market-clearing” is a key assumption underlying the Neoclassical Theory of Distribution. What exactly does this “market-clearing” assumption mean? When might we expect it to be a plausible assumption, and when would it be less plausible?

One advantage of having a market-clearing price for water in all uses is Select one: a....

One advantage of having a market-clearing price for water in all uses is Select one: a. water can be moved to areas where the price is the lowest b. since prices anticipate the future, possible droughts will be reflected in today's prices encouraging water conservation now before the drought actually hits the supply c. low income water users will have to pay more than high income users for water even without a drought d. the rich can get all the...

Suppose the equilibrium price of gasoline is $3 per gallon. a. Using the demand and supply...

Suppose the equilibrium price of gasoline is $3 per gallon. a. Using the demand and supply graph, draw this equilibrium in the space below. Make this graph large, it will be used for future questions. b. Now suppose the government imposes a binding price floor on this market. Identify a value for this price floor that would be binding and show it on the graph. Graphically show whether excess demand or excess supply would result. c. With the price floors,...

Subjects