Final answer:
The student's question pertains to the economic principles of supply and demand, and illustrates how changes in price can affect the quantity supplied and demanded, using the ceteris paribus assumption.
Step-by-step explanation:
The question involves the concept of supply and demand, specifically how the quantity supplied and quantity demanded of a product react to changes in price, holding other factors constant (ceteris paribus).
The principle illustrated shows that if the price of a gallon of gasoline rises above the equilibrium price, we would expect the quantity demanded to decrease (in this example, to 550 gallons) and the quantity supplied to increase (to 640 gallons), resulting in a surplus of 90 gallons in the market.
The ceteris paribus assumption allows economists to understand the effect of one variable on another, isolating this relationship without the interference of other changing factors.
For example, when the price of a car increases from $20,000 to $22,000, the quantity supplied increases from 18 million cars to 20 million cars, indicating a direct relationship between price and quantity supplied for cars.
In summary, these concepts are fundamental in understanding market dynamics and predicting how changes in price can affect the balance between supply and demand.