Question

Review Figure $3.4$. Suppose the price of gasoline is $\backslash (1.60$per gallon. Is the quantity demanded higher or lower than at the equilibrium price of $\backslash )1.40$per gallon? What about the quantity supplied? Is there a shortage or a surplus in the market? If so, how much?

Short answer

The quantity demanded would be lower and the quantity supplied would be higher.

There a surplus in the marketof$90$gallons.

Step-by-step solution

Step 1. Define demand and supply.

Demand is an economic theory that refers to a consumer's desire to buy products and services as well as their readiness to pay a price for them.

The total amount of a certain commodity or service available to consumers is described by supply, which is a fundamental economic notion.

Step 2.  Is the quantity demanded and quantity supplied higher or lower than at the equilibrium price of $1.40 per gallon? Is the market in short in supply or excess supply? If so, how much will it cost?

As $\$1.60$per gallon is greater than the equilibrium price, the quantity required at$550$gallons would be lower, while the quantity provided at $640$gallons would be larger. (These outcomes are due to supply and demand rules, respectively.) Both lower quantity demanded and higher quantity supplied would result in a $640-550=90$gallon surplus in the gasoline market.