Assume the following data describe the gasoline market:

(a) Graph the demand and supply curves.
(b) What is the equilibrium price?
(c) If supply at every price is reduced by 6 gallons, what will the new equilibrium price be?
(d) If the government freezes the price of gasoline at its initial equilibrium price, how much of a surplus or shortage will exist when supply is reduced as described in part c.?

Transcribed Image Text:

Price per gallon Quantity demanded Quantity supplied $2.00 2.25 2.50 2.75 3.00 3.25 3.50 34 33 32 31 30 34 36 36 35 24 26 28 30 32