Problem
• Step I: Draw a supply-and-demand diagram. Price is on the vertical axis, quantity is on the horizontal axis, demand is downward-sloping, supply is upward-sloping, and be sure to label equilibrium price and equilibrium quantity.
• Step II. Change colors! If you have a highlighter or colored pencil (crayon, sharpie, whatever).
• Step III. Show the change in demand or supply (only one curve will shift in each scenario). State if the curve decreases or increases.
• Step IV: Show the new equilibrium price and equilibrium quantity.
• Step V: Repeat Steps I-IV for each scenario. You will have a total of 4 graphs.
o Scenario 1: A hurricane destroys refineries that produce gasoline.
o Scenario 2: Consumers purchase electric vehicles that do not need gasoline.
o Scenario 3: Technological innovation occurs that reduces the cost of producing gasoline.
o Scenario 4: Road trips become the one and only vacation option and many families opt for long-distance road trips.