Question

Several major Asian and European cities have begun restricting vehicular travel to reduce congestion and/or pollution. Several methods have been used to accomplish these objectives, including requiring special permits for vehicles traveling during peak hours and limiting driving days according to license plate numbers (even and odd numbered vehicles may drive on alternating days). The City of Anytown, FL passed an ordinance that gasoline-powered vehicles with odd-numbered license plates may only drive in the downtown district on Mondays, Wednesdays, and Fridays, and gasoline-powered vehicles with even-numbered license plates may only drive in the downtown district on Tuesdays, Thursdays, and Fridays. Diesel and electric-powered vehicles may drive in the downtown district without restriction.
What will happen to the equilibrium price and quantity for gasoline in the downtown district on Monday, Tuesday, Wednesday, and Thursday?
a. Both the equilibrium price and quantity will go down.
b. The equilibrium price will go down, and the equilibrium quantity will go up.
c. The equilibrium price will go up, and the equilibrium quantity will go down.
d. Both the equilibrium price and quantity will go up.

Answer 1

Answer:

a. Both the equilibrium price and quantity will go down.

Explanation:

On those days, it will be a decrease in the demand which will make the demand quantity to go down which will generate a shift in the demand curve to the left and with less people willing to buy gasoline, the equilibium quantity will drop and in order to sell, the price will drop too.