nclude correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to "Calculate," you must show how you arrived at your final answer.

Assume gasoline is sold in a competitive market, the equilibrium price is $50 per barrel, and the equilibrium quantity is 1000 barrels.

(a) Using the numerical values above, draw a correctly labeled graph of the gasoline market and show each of the following.

(i) The equilibrium price

(ii) The equilibrium quantity

(b) At a price of $40 per barrel, will there be a surplus or a shortage in the market? Explain.

(c) Assume new oil wells are discovered. On your graph from part (a), show how this change will affect the equilibrium price and quantity in the market for gasoline.

(d) Assume instead there is an increase in the price of gasoline-operated automobiles. How will this change affect the market for gasoline? Explain.

(e) If both changes in part (c) and part (d) occurred simultaneously, what will happen to the equilibrium price and quantity of gasoline?

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