Price per gallon $2.00 2.25 2.50 2.75 3.00 3.25 3.50
Quantity demanded 26 25 24 23 22 21 20
Quantity supplied 16 20 24 28 32 36 40
Question 1: What is the equilibrium?
Question 2: If supply at every price is reduced by 10 gallons, what will the new equilibrium price be?
Question 3: 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?
Question 4: Illustrate answers on a graph.