9. Let’s take a look at two real-world episodes in the market for gasoline and try to figure out why the price fluctuates so much.

a. In the summer of 2008, the price of regular gasoline in the United States soared to over

$4 per gallon. Then, in the fall of that year, the U.S. economy fell into a deep recession that significantly reduced consumers’ income. Use the supply and demand model to determine which curve shifted and what happened to the equilibrium price of gasoline. For this part of the question, assume no other changes in the market for gasoline.

b. By the summer of 2014, the price of regular gasoline in the United States was hovering around $3.50 per gallon. But innovations in oil extraction technology, such as hydraulic fracking, reduced the price of crude oil significantly.

Crude oil is the primary input for gasoline production.

Use the supply and demand model to determine which curve shifted and then what happened to the equilibrium price of gasoline.

For this part of the question, assume no other changes in the market for gasoline.