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Economics: Demand and Supply Curve. for Oil and Gas

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Given the data in the attachment on gasoline supply and demand:

a) What is the equilibrium price?

b) How large a market shortage would exist if government set a price ceiling of $2 per gallon?

6. Illustrate what's happening to oil prices in the World View attached.

a) Which direction did the demand curve shift?

b) Which direction did the supply curve shift?

c) Did price A increase or B decrease?

(see attachment for full problem description)

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Solution Summary

The problem set deals with questions under economics: Demand and Supply curve. The solution will be useful to students of economics.

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a. What is the equilibrium price?

The equilibrium price is the point where the quantity of gasoline supplied is equal to the amount demanded by consumers.
Price per gallon $5 $4 $3 $2 $1 Price per gallon $5 $4 $3 $2 $1
Al 1 2 3 4 5 Firm A 3 3 2 2 1
Betsy 0 1 1 1 2 Betsy 7 5 3 3 2
Casey 2 2 3 3 4 Casey 6 4 3 3 1
Daisy 1 3 4 4 6 Daisy 6 5 3 2 0
Eddie 1 2 2 3 5 Eddie 4 2 2 2 1
Market total 5 10 13 15 22 Market total 26 19 13 12 5

Price $5 $4 $3 $2 $1
Quantity demanded 5 10 13 15 22
Quantity supplied 26 19 13 12 5

From the above table, you will observe that the quantity demanded and that supplied will be similar when price is $3. Therefore the equilibrium price is $3.

b. How ...

Solution provided by:
Chidi Ngene, M. Sc.
Education
  • B. Sc., University of Nigeria
  • M. Sc., London South Bank University
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