Suppose the annual demand for gasoline as motor fuel in the US can be represented by the demand curve: Qd=125 - 10*P, where Qd is the quantity measured in billions of gallons, P is the price in dollars per gallon, and the supply curve is: Qs=-100 + 40*P .A) First, solve each equation for P, so that you can represent the inverse demand and the inverse supply on a graph with P on the vertical axisB) Now, draw the supply-demand graph, with P on the vertical axis.C) What is the equilibrium quantity of gasoline, in billions of gallons per year? The equilibrium quantity is D) What is the equilibrium price of gasoline?E) What is the amount of consumer surplus (CS), in billions of dollars, at the equilibrium price?F) What is the amount of producer surplus (PS), in billions of dollars, at the equilibrium priceG) What is the total surplus (TS)?

Given demand and supply function Qd = 125-10P Qs = -100+40P

Answered: Suppose the annual demand for gasoline…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the annual demand for gasoline as motor fuel in the US can be represented by the demand curve: Qd=125 - 10*P, where Qd is the quantity measured in billions of gallons, P is the price in dollars per gallon, and the supply curve is: Qs=-100 + 40*P .

A) First, solve each equation for P, so that you can represent the inverse demand and the inverse supply on a graph with P on the vertical axis
B) Now, draw the supply-demand graph, with P on the vertical axis.

C) What is the equilibrium quantity of gasoline, in billions of gallons per year? The equilibrium quantity is

D) What is the equilibrium price of gasoline?
E) What is the amount of consumer surplus (CS), in billions of dollars, at the equilibrium price?
F) What is the amount of producer surplus (PS), in billions of dollars, at the equilibrium price
G) What is the total surplus (TS)?

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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