Consider the market for gasoline in Calgary. Units of quantity and price are in thousands of litresand $/litre, respectively. Letting denote the price, suppose the quantity demanded of gasoline,denoted as,isgiven by thefollowingequation:

=2000 800

Supposethat weknowthefollowingaboutthesupplyof gasoline:

• Thesupplyequationislinear.

• Whenthepriceis$0.25/litre,900thousandlitresofgasolineissuppliedtoCalgary.

• Market research shows that indicates that a price increase of $0.25/litre would result inanincreasein 100thousand litres.

1. Use the information provided to find the supply function, i.e., determine and in theequation =+ where andare thequantitysupplied and price,respectively.
2. Plot the demand and supply curve with quantity on x-axis and price on y-axis. Clearlyidentify the numerical values of any intercepts on any axes, and shade and label the areasthatrepresent consumers'surplusandproducers'surplus.

1. Find the equilibrium price and quantity. Add these values to the plot in part b). Find thevalues ofconsumers' andproducers' surplus.

Suppose there is a snow storm near Calgary that results in 300 thousand litres of gasoline thatwouldhaveotherwisebeenbroughttoCalgaryateverypricelevelnolongerbeingavailable.

1. Howdoesthisshift eachcurve, if atall?Determinethenewequation(s).

1. Redraw the plot from part b) with the new equation(s). Determine the equilibrium price andquantityandcalculatethevalueof consumers'andproducers'surplusafterthedisruption.

1. Indicate how the equilibrium prices and quantities from part e) compare to those from partb).Explainwhythechangesareeconomicallyreasonableornot.