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Demand for gasoline in competitive market

What effect should each of the following have on the demand for gasoline in a competitive market? State what happens to demand. Explain your reasoning in each case and relate it to a demand determinant.

(a) an increase in the number of cars

(b) the economy moves into a recession

(c) an increase in the price of car insurance, taxes, maintenance

(d) consumer expectations of substantial price increases in gasoline

Solution Preview

(a) Demand increases because there would be more buyers of gasoline. The additional buyers would come from the additional cars and trucks.

(b)Demand decreases because ...

Solution Summary

What effect should each of the following have on the demand for gasoline in a competitive market? State what happens to demand. Explain your reasoning in each case and relate it to a demand determinant.

$2.19