Final answer:
The quantity demanded of gasoline decreases as the price of gasoline increases, reflecting the law of demand which highlights the inverse relationship between price and quantity demanded.
Step-by-step explanation:
As the price of gasoline increases, the quantity demanded of gasoline decreases. This is due to the law of demand, which states that there is an inverse relationship between the price of a good and the quantity demanded. When gasoline prices are low, consumers increase their use, and the quantity demanded goes up. Conversely, when prices are high, consumers look for ways to conserve fuel or seek alternatives, leading to a decrease in the quantity demanded.
For instance, when the price is below its equilibrium level, say at $1.20 per gallon, the quantity of gasoline demanded increases since people are more likely to drive longer distances, warm up their cars longer, and purchase less fuel-efficient vehicles. However, at this low price, gasoline producers are less inclined to supply gasoline, causing the quantity supplied to decrease from 600 to 550, according to Figure 3.2 in the provided reference.