Question

Southern Oil's distributors have indicated that demand for the premium gasoline for the next production period will be at most 20,000 gallons. gasoline and let P be the gallons of premium gasoline.) Max s.t. Grade A crude oil available Production capacity Demand for premium R,P≥0

What is the optimal solution?

Answer 1

At prices above the equilibrium, such as $1.80 and $1.60 per gallon, the quantity of premium gasoline supplied exceeds the quantity demanded, creating a surplus in the market.

Step-by-step explanation:

The question relates to a situation where the price of premium gasoline is set above its equilibrium price, resulting in changes in the quantity demanded and quantity supplied. At a price of $1.80, the quantity of gasoline supplied increases to 680 gallons due to the incentive for producers to increase output. Conversely, the quantity demanded drops to 500 gallons, leading to an excess supply or surplus. A similar effect occurs at a price of $1.60, where the quantity demanded is 550 gallons and quantity supplied is 640 gallons, also resulting in a surplus of 90 gallons above the equilibrium state.