Suppose you read in the newspaper (or online) that the price of gasoline is up a

Question

Suppose you read in the newspaper (or online) that the price of gasoline is up and consumers bought more gasoline. How can the laws of supply and demand explain this?

a. The gasoline market is an exception to the laws of supply and demand.
b. Supply must have decreased while demand remained constant.
c. They can't. The newspaper reporter must have gotten his facts wrong since this would be impossible.
d. A non-price factor must have changed, violating the ceteris parabis condition, and causing supply to decrease.
e. This could be due to an increase in demand with no shift in the supply curve.

Explanation / Answer

Since there is a fear of a shortage in gasoline, consumers want more now and the demand curve shifts to the right while suply stays constant. This increases the price in the short-run, hence e is the answer

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