Question

The demand for gasoline tends to increase during times when many people go on vacation. This is largely due to the fact that more people are on the roads and more people need to fill up their gas tanks. The times of highest demand tend to be the summer and on holidays, such as Memorial Day the Fourth of July, and Thanksgiving.

What is the likely effect of this high demand on gasoline prices?

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A.

The supply of gasoline will increase.

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B.

The demand for gasoline will decrease.

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C.

The price of gasoline will decrease.

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D.

The price of gasoline will increase.

Answer 1

D) The price of gasoline will increase.

Step-by-step explanation:

Since the quantity demanded of gasoline increases during the summer and holidays, the equilibrium price will rise. This simply follows the law of supply and demand.

Another factor that could determine how much the price of gasoline will increase, is whether or not the supply of gasoline also increases during summer and the holidays. If the supply of gasoline increases, then the increase in the equilibrium will be lower than if the supply of gasoline remains unchanged.