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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