The following table gives hypothetical data for the quantity...

The following table gives hypothetical data for the quantity of gasoline demanded and supplied in Los Angeles per month, $$\begin{array}{ccc} & \text { Quantity } & \text { Quantity } \\ & \text { Demanded } & \text { Supplied } \\ \text { Price per } & \text { (millions } & \text { (millions } \\ \text { Gallon } & \text { of gallons) } & \text { of gallons) } \\ \hline \$ 1.20 & 170 & 80 \\ \$ 1.30 & 156 & 105 \\ \$ 1.40 & 140 & 140 \\ \$ 1.50 & 123 & 175 \\ \$ 1.60 & 100 & 210 \\ \$ 1.70 & 95 & 238 \end{array}$$ a. Graph the demand and supply curves. b. Find the equilibrium price and quantity. c. Illustrate on your graph how a rise in the price of automobiles would affect the gasoline market.

The following table gives hypothetical data for the quantity of gasoline demanded and supplied in Los Angeles per month,
$$\begin{array}{ccc}
& \text { Quantity } & \text { Quantity } \\
& \text { Demanded } & \text { Supplied } \\
\text { Price per } & \text { (millions } & \text { (millions } \\
\text { Gallon } & \text { of gallons) } & \text { of gallons) } \\
\hline \$ 1.20 & 170 & 80 \\
\$ 1.30 & 156 & 105 \\
\$ 1.40 & 140 & 140 \\
\$ 1.50 & 123 & 175 \\
\$ 1.60 & 100 & 210 \\
\$ 1.70 & 95 & 238
\end{array}$$
a. Graph the demand and supply curves.
b. Find the equilibrium price and quantity.
c. Illustrate on your graph how a rise in the price of automobiles would affect the gasoline market.

Key Concepts

Graphical Representation of Market Data

Graphing the demand and supply curves provides a visual tool to analyze market behavior. It allows one to identify equilibrium, observe responses to changes in price, and evaluate the effects of external factors by showing shifts in the curves.

Shifts in Demand (Non-price Determinants)

Shifts in the demand curve occur when non-price factors, such as consumer income, the price of complementary or substitute goods, or external economic factors, change consumers’ willingness to buy a good. For example, a rise in the price of automobiles can affect the demand for gasoline by altering the overall consumption of gasoline-dependent vehicles, leading to a leftward or rightward shift in the demand curve.

Market Equilibrium

Market equilibrium occurs where the demand and supply curves intersect. At this point, the quantity demanded by consumers equals the quantity supplied by producers, resulting in a stable market price and quantity without any intrinsic pressure for change.

Demand Curve

The demand curve represents the relationship between the price of a good and the quantity consumers are willing and able to purchase at each price level. Typically, it is downward sloping, reflecting the principle that as price decreases, consumers tend to buy more of the good, and vice versa.

Supply Curve

The supply curve shows the relationship between the price of a good and the quantity producers are willing to offer for sale at each price level. It is generally upward sloping, indicating that as the price increases, producers are willing to supply a larger quantity of the good.

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