Stassel on Gasoline Prices Submit Assignment Due Thursday by 11:59pm Points Avai
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Stassel on Gasoline Prices Submit Assignment Due Thursday by 11:59pm Points Available until Sep 21 at 11:59am 50 Submitting a text entry box Due Date: Day 4 Ipost in the appropriate place in Post a CheckPoint Assignment] Watch:"Stassel on Gasoline Prices" http:/(cdnabcnews.com/stosse/free/Stossel/070825stossel gasprices wmv Post: your response to the following question: Do you agree with the following statements? Using the video and material in Chapter 3 of your textbook, carefully explain why or why not Warning: be careful to not confuse demand and supply with quantity demanded and quantity supplied. a. Gasoline prices rose during 2006 because the demand for gasoline grew more slowly than supply. b. Assuming that gasoline and gas-guzzling automobiles are complements, we can predict that the demand for gas- guzzling automobiles increased. c. An increase in the price of gasoline will lead to a decrease in the demand for gasoline and an increase the supply of gasoline causing the price of gasoline to fall.Explanation / Answer
1) Dont agree, If the demand for gasoline was to price at a lower rate than the increase in supply, the equilibrium prices should fall rather than rise. Rather this is an instance where the rise in demand overshot the rise in supply resulting in an increase in prices.
2)Agree. The upward price movement of gasoline could possibly be caused by a rise in demand for gas. As automobiles and gasoline are complements, a rise in demand for gas will be complemented by a rise in demand for automobiles.
3) Agree, as price and quantity demand are inversely related, a rise in prices will cause a fall in quantity demanded of gasoline. A rise in supply will cause a rightward shift of the supply of gasoline lowering equilibrium price( if the rise of demand isn't greater). This will only then reduce prices.
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