1. Assume that electric vehicles (EV) and gasoline cars are substitutes. Now suppose there is a large increase in gasoline prices. What happen to the gasoline car market? What happens to the EV market? Draw a picture for each market and indicate what happens to prices and quantities after the increase in gasoline prices. (make sure to draw the picture)

2. List five other shocks - supply or demand shifts - that would lead to an increase in the market quantity of EVs relative to gasoline cars.

3. Consider the market for EVs and gasoline cars again. Suppose the government wants to reduce greenhouse gas emissions and therefore begins subsidizing EVs. Consider two cases: One in which EV supply is relatively elastic and one in which it is relatively inelastic. Draw a picture of what happens to the EV market in both cases. In which case is the subsidy more effective? (make sure to draw the picture)

4. In class we learned that oil prices had been very stable and falling gradually until around the 1970s Arab countries decided to use oil supply as a geopolitical power tool. One can consider this policy as a quantitative restriction or production quota. Draw a picture of what happens to the market for oil if suppliers restrict their production below the market equilibrium. What happens to prices? What happens to producer and consumer surpluses, what about total surplus? (make sure to draw the picture)

5. The Federal Reserve Economic Data (FRED) database is available at https://fred.stlouisfed.org. Go to FRED and search for data on crude oil prices. You will find several series; click on one of them, such as Crude Oil Prices: West Texas Intermediate (WTI)Cushing, Oklahoma. Adjust the dates to focus in on the time period from January 1, 2019, through April 15, 2020. The short recession induced by COVID-19 is shown by the shaded area. Download the graph and copy-paste it to your solution key. What happened to crude oil prices during the recession, especially as the recession continued? Do you think the change in price was driven more by a shift to demand or to supply? Draw a picture that captures the market for crude oil prices and illustrate what happened to the market at the onset of the COVID-19 pandemic. (make sure to draw the picture)