Question

89. Refer to the above diagram. A shortage of 160 units would be encountered if price was:

A. $1.10, that is, $1.60 minus $.50.
B. $1.60.
C. $1.00.
D. $.50.

Answer 1

If the price of gasoline is $1.00 per gallon, the quantity demanded is higher than at the equilibrium price of $1.40 per gallon, and there is a shortage of 200 gallons.

Step-by-step explanation:

If the price of gasoline is $1.00 per gallon, the quantity demanded will be higher than at the equilibrium price of $1.40 per gallon. At $1.00, the quantity demanded would be 600 gallons, compared to the equilibrium quantity demanded of 450 gallons at $1.40 per gallon. The quantity supplied, on the other hand, will be lower at $1.00. At the equilibrium price of $1.40, the quantity supplied is 450 gallons, while at $1.00, the quantity supplied is 400 gallons. Therefore, there would be a shortage of 200 gallons in the market at a price of $1.00 per gallon.