Demand and supply often shift in the retail market for gasoline. Here are two demand curves and two supply curves for gallons of gasoline in the month of May in a small town in Maine.

QUANTITY DEMAND QUANTITY SUPPLIED

PRICE D1 D2 S1 S2

$4.00 5000 7500 9000 9500 $______ 6000 8000 8000 9000

$2.00 ______ 8500 _______ 8500

$_____ ______ 9000 5000 ______

a.Use the following facts to fill in the missing data in the table.

If demand is D₁and supply is S₁, the equilibrium quantity is 7,000 gallons per month.

When demand is D₂and supply is S₁, the equilibrium price is $3.00 per gallon.

When demand is D₂and supply is S₁, there is an excess demand of 4,000 gallons per month at a price of $1.00 per gallon.

If demand is D₁and supply is S₂, the equilibrium quantity is 8,000 gallons per month.

Instructions:Fill the missing data in the table above.

b.Compare the two equilibriums. In the first, demand is D₁and supply is S₁. In the second, demand is D₁and supply is S₂. By how much does the equilibrium quantity change? By how much does the equilibrium price change?

Equilibrium quantity ______ by ______ gallons per month

Equilibrium price ______ by $_______

c.If supply falls from S₂to S₁while demand declines from D₂to D₁, does the equilibrium price rise, fall, or stay the same

The equilibrium price?

What if only supply falls

The equilibrium price?

What if only demand falls

The equilibrium price?

d.Suppose that supply is fixed at S₁and that demand starts at D₁.

By how many gallonsper month would demand have to increase at each price level such that the equilibrium price per gallon would be $3.00?

_________ gallons per month?

By how many gallonsper month would demand have to increase at each price level such that the equilibrium price per gallon would be $4.00?

_______ gallons per month?