09/10/18 The figure below depicts the effect of an increase in the supply of gas
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Question
09/10/18 The figure below depicts the effect of an increase in the supply of gasoline on equilibrium price and equilibrium quantity Use the diagram to answer the questions below the figure. Price (per gallon) D, Quantity gallons) (a) In the short run, the equilibrium price falls by a relatively relatively amount, but the equilibrium quantity increases by a amount. (b) In the long run, the equilibrium price falls by a relatively relatively amount, but the equilibrium quantity increases by a amount. 06/18> 4OF 18 QUESTIONS COMPLETEDExplanation / Answer
The figure below depicts the effect of an increase in the supply of gasoline on equilibrium price and equilibrium quantity.
Studying the diagram we can reach to the following conclusions :
(a) In the short run, the equilibrium price falls by a relatively P1-P3 amount, but the equilibrium quantity increase by a relatively Q2- Q1 amount.
{Explatanation:- Following the original steep demand curve we can see, that when in the short run the supply curve shifts to the right it interacts with the demand curve at a lower portion of the diagram giving us the points ( Q3, P2). }
(b) In the long run, the equilibrium price falls by a relatively P1-P2 amount, but the equilibrium quantity increase by a relatively Q3- Q1 amount.
{Explanation:- In the long run when the demand curve adjusts to the outer shifted supply curve, it takes an inclined slope, thus arriving at the points (Q3, P2) }.
Note- The answers are given in reference to changes in prices and quantities from its initial original position.
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