Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Assume there are two goods in an economy, gasoline and petrodiesel that are substitutes in consumption but complements in production. Gasoline demand and supply are:

Assume there are two goods in an economy, gasoline and petrodiesel that are substitutes in consumption but complements in production.

Gasoline demand and supply are: Qd g = 750 ‒ 45Pg + 30Pp and Qs g = 30Pg + 15Pp where Pg is price of gasoline and Pp price of petrodiesel.

Petrodiesel demand and supply are: Qd p = 1,495 ‒ 40Pp + 23Pg and Qsp = 25Pp + 10Pg

a. What are the equilibrium prices and quantities of gasoline and petrodiesel?

b. If the demand for gasoline decreases by 300 at every price, what would the equilibrium prices and quantities of gasoline and petrodiesel be?

c. Explain, in no more than 5 to 7 sentences, how the inward shift in demand for gasoline affects the market for petrodiesel through the demand-side link.

d. Explain, in no more than 5 to 7 sentences, how the inward shift in demand for gasoline affects the market for petrodiesel through the supply-side link.

e. According to your results from parts a and b, which one is dominant? Demand-side link or supply-side link? Explain your response in a maximum of 3 sentences.

Step by Step Solution

3.39 Rating (152 Votes )

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Econometric Analysis

Authors: William H. Greene

5th Edition

130661899, 978-0130661890

More Books

Students also viewed these Economics questions

Question

e. What age client does the person see?

Answered: 1 week ago

Question

Compute Paasches index for 2013 using 2000 as the baseperiod.

Answered: 1 week ago