Question

The market for gasoline in May is in equilibrium, at a market clearing price of $2.50 per gallon. After Memorial Day, the demand curve for gasoline increases, which causes the demand curve for gasoline to shift to the right, creating a shortage at $2.50 per gallon which causes the market clearing price of gasoline to fall. the demand curve for gasoline to shift to the right, creating a shortage at $2.50 per gallon which causes the market clearing price of gasoline to rise. the demand curve for gasoline to shift to the left, creating a shortage at $2.50 per gallon which causes the market clearing price of gasoline to rise. the demand curve for gasoline to shift to the left, creating a shortage at $2.50 per gallon which causes the market clearing price of gasoline to fall.

Answer 1

The demand curve of gasoline to shifts to right, causing market price of gasoline to rise.

Step-by-step explanation:

Old equilibrium price = $2 . Memorial day - demand increases i.e shifts rightwards. Increased rightward shifted demand curve creates excess demand of gasoline at old price i.e $2 . This excess demand creates competition among buyers and raises the price of gasoline.