Review Figure 3.4. Suppose the price of gasoline is $1.60 per gallon. Is the quantity demanded higher or lower than at the equilibrium price of $1.40 per gallon? What about the quantity supplied? Is there a shortage or a surplus in the market? If so, how much?

Figure 3.4

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P ($ per gallon) $2.20 $1.80 $1.40 a $1.20 $1.00 $0.60 Excess supply or surplus E S An above-equilibrium price Equilibrium price A below-equilibrium price Excess demand D or shortage 300 400 500 600 700 800 900 Quantity of Gasoline (millions of gallons)