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Given the following data on gasoline supply and demand, complete the Market Total row for each table
Given the following data on gasoline supply and demand, complete the Market Total row for each table.
Quantity demanded (gallons per day)
| Price per gallon | $5.00 | $4.00 | $3.00 | $2.00 | $1.00 |
| Al | 1 | 2 | 3 | 4 | 5 |
| Betsy | 0 | 1 | 1 | 1 | 2 |
| Casey | 2 | 2 | 3 | 3 | 4 |
| Daisy | 1 | 3 | 4 | 4 | 6 |
| Eddie | 1 | 2 | 2 | 3 | 5 |
| Market Total |
Quantity supplied (gallons per day)
| Price per gallon | $5.00 | $4.00 | $3.00 | $2.00 | $1.00 |
| Firm A | 3 | 3 | 2 | 2 | 1 |
| Firm B | 7 | 5 | 3 | 3 | 2 |
| Firm C | 6 | 4 | 3 | 3 | 1 |
| Firm D | 6 | 5 | 3 | 2 | 0 |
| Firm E | 4 | 2 | 2 | 2 | 1 |
| Market Total |
Instructions: Enter your responses rounded to the nearest whole number.
(a) What is the equilibrium price? _____ $ per gallon.
(b) How much of a market shortage would exist if the government set a price ceiling of $1 per gallon?
There would be a _____ gallon shortage.
Expert Solution
To get the market total for the first table, we will add up the demand of each consumer at all price levels.
Quantity demanded (gallons per day)
| Price per gallon | $5.00 | $4.00 | $3.00 | $2.00 | $1.00 |
| Al | 1 | 2 | 3 | 4 | 5 |
| Betsy | 0 | 1 | 1 | 1 | 2 |
| Casey | 2 | 2 | 3 | 3 | 4 |
| Daisy | 1 | 3 | 4 | 4 | 6 |
| Eddie | 1 | 2 | 2 | 3 | 5 |
| Market Total | 5 | 10 | 13 | 15 | 22 |
To get the market total for the second table, we will add up the supply of each firm at all price levels.
Quantity supplied (gallons per day)
| Price per gallon | $5.00 | $4.00 | $3.00 | $2.00 | $1.00 |
| Firm A | 3 | 3 | 2 | 2 | 1 |
| Firm B | 7 | 5 | 3 | 3 | 2 |
| Firm C | 6 | 4 | 3 | 3 | 1 |
| Firm D | 6 | 5 | 3 | 2 | 0 |
| Firm E | 4 | 2 | 2 | 2 | 1 |
| Market Total | 26 | 19 | 13 | 12 | 5 |
a.
| Price per gallon | $5.00 | $4.00 | $3.00 | $2.00 | $1.00 |
| QD | 5 | 10 | 13 | 15 | 22 |
| QS | 26 | 19 | 13 | 12 | 5 |
At equilibrium, QS = QD
From the table above, QS = QD at quantity 13
Hence, equilibrium price is $3
b.
At price ceiling $1, QD = 22 and QS = 5
Hence, shortage = 22 - 5 = 17 gallon
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