A market research team has com up with the demand and supply schedules for gasoline in Motorville in the table below . Use these data to analyze the situation in the market for gas in Motorville .
a) Draw a figure showing the demand curve for gasoline and the supply curve of gasoline . What are the equilibrium price and quantity ?
b) Suppose the price is $1.30 . Describe the situation in the market and explain how the market adjusts . Now suppose the price is $1.00 . Describe the situation in the market and explain how the market adjusts .
c) The market research report also predicts that a rise in the price of crude oil will decrease the quantity of gas supplied by 20000 gallons a week at each price . Suppose the price of crude oil does rise . Use your figure to show how this will affect the market for gas . How will the market adjust ? What will be the new equilibrium price and quantity ?
(cents per gallon) Quantity demanded
(thousands of gallons per week) Quantity supplied
(thousands of gallons per week)
90 80 20
100 70 30
110 60 40
120 50 50
130 40 60
140 30 70
150 20 80