New equilibrium price

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Q. Assume the following data describe the gasoline market:
Price per gallon: $2.00 2.25 2.50 2.75 3.00 3.25 3.50
Quantity demand 26 25 24 23 22 21 20
Quantity supplied 16 20 24 28 32 36 40

(a) What is the equilibrium price?

(b) If supply at every price is reduced by five gallons, what will the new equilibrium price be?

(c) If the government freezes the price of gasoline at its initial equilibrium price, how much of a surplus or shortage will exist when supply is reduced as described above?

(d) Demonstrate your answers on a graph.

Reference no: EM138590

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