Final answer:
An increase in the cost of a related good, such as jet fuel for air travel, decreases supply, causing an upward or leftward shift of the supply curve. This results in a higher equilibrium price and lower equilibrium quantity. Changes in costs, taxes, or regulations, among others, can cause such shifts in the market for gasoline.
Step-by-step explanation:
To understand which line shifted on a supply and demand graph, and whether it represents an increase or decrease, you must first draw the market showing the initial supply and demand curves, labeling the equilibrium price and quantity. Next, you'll determine whether it was the supply or demand curve that shifted. If it's the case such as with gasoline, an increase in a related cost, like jet fuel, affects the supply, leading to an upward or leftward shift of the supply curve, indicating a decrease in supply. This shift resultingly increases the equilibrium price and decreases the equilibrium quantity as the new equilibrium is established at the intersection of the new supply curve and the original demand curve.
Summarizing the effects of the four possible shifts: An increase in demand raises both equilibrium price and quantity; a decrease in demand lowers them. An increase in supply lowers equilibrium price but increases the quantity, and a decrease in supply raises the price but decreases the quantity.
In the market for gasoline, factors like changes in the price of oil, refinery disruptions, changes in taxes, or regulations can all cause shifts in the supply or demand curves.