Question

During 2008 the supply of gasoline decreased while at the same time the demand for gasoline increased. If the magnitude of the increase in demand was greater than the magnitude of the decrease in supply, then the equilibrium price of gasoline ________ and the equilibrium quantity ________.

Answer 1

Answer:

Increases; Increases

Explanation:

During 2008, the supply of gasoline decreases, so as a result there is a leftward shift in the supply curve of gasoline. Also, at the same time there is an increase in the demand for gasoline, so as a result there is a rightward shift in the demand curve of gasoline.

It is given that the magnitude of the shift of demand curve is greater than the magnitude of the shift of supply curve.

Therefore, this will result in an increase in the equilibrium price and equilibrium quantity of gasoline.