Question

If the price of oil increases significantly, buyers and sellers of gasoline will both expect the price of gasoline to also increase. if sellers of gasoline act on their expectations more than the buyers do, then:

Answer 1

Answer: The equilibrium price of gasoline will increase while the equilibrium quantity will increase

Buyers and sellers of gasoline will both expect the price of gasoline to also increase if the price of oil increases significantly. However, if sellers act on their expectations that the price 0f gasoline will increase more than the buyers of gasoline do, then the equilibrium price of gasoline will increase while the equilibrium quantity will increase.