-A Market Research Team Has Come Up with the Demand

Essay

$$\begin{array} { | l | l | l | } \hline \begin{array} { l } \text { Price (cents } \\\text { pergallon) }\end{array} & \begin{array} { l } \text { Quantity } \\\text { demanded } \\\text { (thousands of } \\\text { gallons per } \\\text { week) }\end{array} & \begin{array} { l } \text { Quantity } \\\text { supplied } \\\text { (thousands of } \\\text { gallons per } \\\text { week) }\end{array} \\\hline 290 & 80 & 20 \\\hline 300 & 70 & 30 \\\hline 310 & 60 & 40 \\\hline 320 & 50 & 50 \\\hline 330 & 40 & 60 \\\hline 340 & 30 & 70 \\\hline 350 & 20 & 80 \\\hline\end{array}$$
-A market research team has come up with the demand and supply schedules for gasoline in Motorville in the table above. Use these data to analyze the situation in the market for gas in Motorville.
a) Draw a figure showing the demand curve for gasoline and the supply curve of gasoline. What are the equilibrium price and quantity?
b) Suppose the price is $3.30. Describe the situation in the market and explain how the market adjusts. Now suppose the price is $3.00. Describe the situation in the market and explain how the market adjusts.
c) The market research report also predicts that a rise in the price of crude oil will decrease the quantity of gas supplied by 20,000 gallons a week at each price. Suppose the price of crude oil does rise. Use your figure to show how this will affect the market for gas. How will the market adjust? What will be the new equilibrium price and quantity?