Question

A shift in the supply curve for gasoline in the United States would result if __________. (LO5) a) people decided to travel more by automobile b) the OPEC nations decided to stop sales of crude oil to the United States c) the price of gasoline increased d) the price of gasoline decreased e) the price of mass transit increased

Short answer

A shift in the supply curve for gasoline in the United States would result if the OPEC nations decided to stop sales of crude oil to the United States (option B). This directly affects the ability of US gasoline producers to produce gasoline, leading to a change in the quantity of gasoline supplied at every price and causing a shift in the supply curve.

Step-by-step solution

Identifying effects on demand and supply

First, we need to distinguish between options that affect the demand for gasoline and options that affect the supply of gasoline. Changes in demand will not directly result in a shift in the supply curve.

Option A: Increased automobile travel

If people decide to travel more by automobile, this would increase the demand for gasoline. However, it does not directly affect the supply of gasoline, so this option will not result in a shift in the supply curve.

Option B: OPEC stops selling crude oil to the United States

If the OPEC nations decided to stop sales of crude oil to the United States, this would directly affect the ability of US gasoline producers to produce gasoline. Since this would result in a change in the quantity of gasoline supplied at every price, option B would lead to a shift in the supply curve.

Option C: Increased price of gasoline

If the price of gasoline increased, demand for gasoline would decrease, which would, in turn, affect the quantity of gasoline supplied. However, this is a movement along the supply curve, not a shift in the supply curve, so option C is not the correct answer.

Option D: Decreased price of gasoline

Similarly, if the price of gasoline decreased, demand for gasoline would increase, affecting the quantity of gasoline supplied. However, this is still a movement along the supply curve and not a shift in the supply curve, so option D is not the correct answer.

Option E: Increased price of mass transit

If the price of mass transit increased, more people may choose to travel by automobile, which would result in an increase in the demand for gasoline. However, this would not directly affect the supply of gasoline, so option E will not result in a shift in the supply curve. Out of all the given options, option B (the OPEC nations deciding to stop sales of crude oil to the United States) would result in a shift in the supply curve for gasoline in the United States.

Key concepts

Gasoline Market

The gasoline market is an essential part of any economy. It balances what people need with what producers supply.
When we talk about this market, it involves both the demand from consumers (people and businesses who need gasoline) and the supply (companies that produce and sell gasoline).
Understanding this market means you need to know how these two sides interact. A change in either supply or demand can affect prices and availability.

• If consumers suddenly want more gasoline, the demand increases.
• If producers find it harder to supply gasoline, the supply decreases.
• Both of these can cause changes in price.

In microeconomics, these basic principles help us understand how the gasoline market operates and reacts to different situations.

OPEC

OPEC, the Organization of the Petroleum Exporting Countries, plays a big role in the global oil industry. This group consists of several major oil-producing countries.
Their decisions can significantly impact the supply of oil, which in turn affects gasoline markets worldwide.

• OPEC can decide to produce more or less oil, affecting global supplies.
• Their actions can lead to shifts in gasoline supply dynamics.
• When OPEC reduces oil sales, it can lead to a decrease in gasoline supply.

This organization is important as it holds a lot of power in determining oil and gasoline prices through its production policies.

Crude Oil

Crude oil is the raw and unrefined substance that serves as the backbone for gasoline production. It's extracted from the earth and processed into various products, including gasoline.
The availability and price of crude oil are critical in determining gasoline supply.

• Higher crude oil prices can make gasoline more expensive to produce.
• Limited supply of crude can restrict how much gasoline is available.
• Any disruption in crude oil supply can lead to shifts in the gasoline supply curve.

Understanding crude oil's role helps to see why changes like OPEC's decisions deeply influence the gasoline market.

Microeconomics Supply and Demand Analysis

Microeconomics focuses on the behavior of individuals and businesses in deciding the allocation of resources. In the context of supply and demand, this analysis is vital.
It helps us predict how changes in the market affect availability and price.

• Supply and demand curves are tools to illustrate this analysis.
• A shift in the supply curve means a change in the situation affecting supply, like OPEC's actions on crude oil.
• A movement along the curve happens when price changes but the overall supply conditions remain the same.

These concepts help explain why only specific changes in an economy lead to shifts in curves, a fundamental aspect of any market's operation.