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Suppose that initially the petrol market is in equilibrium at a price of $2 per litre and a quantity of 45 million litres per month.
Suppose that initially the petrol market is in equilibrium at a price of $2 per litre and a quantity of 45 million litres per month. Then a war in the Middle East disrupts production of oil, shifting the supply curve of petrol from S1 to S2. The price of petrol begins to rise and consumers protest.The government responds by setting a price ceiling of $2 per litre. Use the graph to answer the following questions.
Price (dollars per litre) $5.00 3.00 2.00 Demand 0 30 40 45 Quantity (millions of litres per month)Step by Step Solution
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