Assume the following data describe the gasoline market (answer attached)

Assume the following data describe the gasoline market:

Price per gallon

$1.00

1.25

1.50

1.75

2.00

2.25

2.50

Quantity Demanded

26

25

24

23

22

21

20

Quantity Supplied

16

20

24

28

32

36

40

 

a. What is the equilibrium price?

b. If the quantity supplied at every price is reduced by 5 gallons, what will the new equilibrium price be?

c. If the government freezes the price of gasoline at its initial price, how much of a surplus or shortage will exist when supply is reduced as described above?

d. Illustrate your answers on a graph.

 

 

 

 

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