Final answer:
Lowering the market price to $1.75 would increase demand and potentially create a market disequilibrium if supply doesn't rise to match that demand, leading to a shortage.
Step-by-step explanation:
If the market price of a product, such as coffee, were to be lowered to $1.75, it would have certain implications on market dynamics and participants. According to the law of demand and the law of supply, a change in price leads to a change in behavior among consumers and producers. If we lowered the price to $1.75, more consumers would be willing and able to purchase the product due to the lower cost. This increase in demand could potentially create a shortage in the market if suppliers are unable or unwilling to match the increased demand with a commensurate increase in supply.
For example, if the quantity of coffee demanded increases because of the lower price, but the quantity supplied remains constant or decreases because producers are less incentivized to produce due to lower profits, a disequilibrium occurs in the form of a shortage. This shortage happens because the quantity demanded exceeds the quantity supplied, as we saw with coffee where 300 million pounds were demanded and only 100 million were supplied when the price was lowered.
In the case of gasoline, if its price were to be capped at $1.30 per gallon, as seen in a hypothetical scenario referencing Figure 3.4, we might expect similar dynamics. A price cap below the market equilibrium would likely cause the quantity demanded to exceed the quantity supplied, resulting in a shortage of gasoline and possible rationing or long wait times at gas stations.