1.7. The price of gasoline in the United States depends on the supply of gasoline and the demand for gasoline.

Gasoline is supplied by oil companies that sell it on several markets. Hence the supply of gasoline in the United States depends on the price of gasoline in the United States and its price on other markets. When the price of gasoline outside the United States increases, the U.S.

supply decreases because firms prefer to sell the gasoline elsewhere. How would an increase in the price of gasoline abroad affect the equilibrium price of gasoline in the United States?