Describe the effect of each of the following events on either the demand or supply of gasoline in the USA. Further indicate the likely direction in the amount of gasoline exchanged AND the expected market price (both) when: a. domestic incomes rise b. the price of natural gas rises c. A new oil field is discovered and put into service. d. The average price of automobiles declines

Describe the effect of each of the following events on either the demand or supply of gasoline in the USA. Further indicate the likely direction in the amount of gasoline exchanged AND the expected market price (both) when: a. domestic incomes rise b. the price of natural gas rises c. A new oil field is discovered and put into service. d. The average price of automobiles declines

 

 

Answer:

a. domestic income rises- Since gasoline is integeral part of daily lives and people use it because it is neccesary ingridient for people so income rises does not increse it’s consumption (hence demand) because they will not buy more gasoline, instead they will buy other goods and services.

b. price of natural gas rises- this will increase demand of gasoline because some people will switch to cheap gasoline

c. new oil field’s production will increase the supply of gasoline hence prices will fall but demand will not be effected.

d. this will increase the demand because more consumers will buy the car and hence require more gasoline to run them.

Prices of gasoline majorly impacted by the production capacity changes or major price change in other substitute product.

Asked on February 13, 2018 in economics.
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