The price of a gallon of gas moves up and down often. What this means is that, most of the time, the gasoline market is not in equilibrium. When its price goes up, what might be happening to cause this? When the price goes down, what might be happening to cause this?
Answer:
The price of gasoline is very volatile in nature. The supply and demand for gasoline change for many reasons.
Causes of the rise in the price of gasoline:
(1). Decrease in the supply of gasoline: the supply of gasoline may decrease due to various reasons such as war, natural calamities, etc. As a result of a decrease in the supply of gasoline the price of gasoline will rise.
(2). Increase in demand: the demand for gasoline in winter increases at the same time supply falls due to blockage of ways caused by snow. This leads to an increase in the price of gasoline to keep demand in line with supply.
(3). Increase in input cost of gasoline: if the cost of input used in gasoline production rises then also the price of gasoline will go up.
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