Question

note: please hand write your answers on a sheet of paper and upload them to canvas. you may scan them or take a picture. please make sure your writing is legible/readable and your images are clear. alternatively, you may also type your answers however many of the questions require you to use illustrations to make your points. jpg or pdf file format only!

1. graph both the demand and supply curve together and identify the equilibrium price and quantity.

ii. define what an equilibrium represents. how do you know if a market is in equilibrium? provide an example.
iii. graph both the demand and supply curve together. graph and identify the impact of a price floor of $2.00. explain what will happen to gasoline in this market.
iv. graph both the demand and supply curve together. graph and identify the impact of a price floor of $1.20. explain what will happen to gasoline in this market.
v. define what a price floor and price ceiling is? provide an example of each.
vi. using your graph from part i., show graphically the impact of a shift in demand to the right. what will happen to the price and quantity?
vii. using your graph from part i., show graphically the impact of a shift in demand to the right and a shift in supply to the left (simultaneously). what will happen to the price and quantity?

Explanation:

Step1: Define equilibrium

Equilibrium in a market occurs where the quantity demanded equals the quantity supplied. It is the point of intersection of the demand and supply curves. For example, in a gasoline - market, if at a certain price the amount consumers want to buy is the same as the amount producers want to sell, that's the equilibrium.

Step2: Graph demand and supply

The demand curve is downward - sloping, indicating an inverse relationship between price and quantity demanded (as price increases, quantity demanded decreases). The supply curve is upward - sloping, showing a positive relationship between price and quantity supplied (as price increases, quantity supplied increases). Plot the given price - quantity data points for both demand and supply on a graph with price on the y - axis and quantity on the x - axis.

Step3: Price floor and ceiling

A price floor is a minimum price set above the equilibrium price. For a $2.00 price floor in the gasoline market, since it is above the equilibrium, it will lead to a surplus as quantity supplied will be greater than quantity demanded. A price ceiling is a maximum price set below the equilibrium price. For a $1.20 price ceiling, it will lead to a shortage as quantity demanded will be greater than quantity supplied.

Step4: Shifts in curves

A right - shift in demand (e.g., due to an increase in consumer income or a rise in the price of a substitute good) will increase both the equilibrium price and quantity. A left - shift in demand will decrease both. A right - shift in supply (e.g., due to technological improvements) will decrease the equilibrium price and increase the quantity, while a left - shift in supply will increase the equilibrium price and decrease the quantity.

Answer:

The explanations above address the questions regarding equilibrium, price floors and ceilings, and shifts in demand and supply curves in the gasoline market. Graphs should be drawn as described to visually represent these concepts.