Assume the following data describe the gasoline market:
Price per gallon
$1.00
1.25
1.50
1.75
2.00
2.25
2.50
Quantity Demanded
26
25
24
23
22
21
20
Quantity Supplied
16
20
24
28
32
36
40
a. What is the equilibrium price?
b. If the quantity supplied at every price is reduced by 5 gallons, what will the new equilibrium price be?
c. If the government freezes the price of gasoline at its initial price, how much of a surplus or shortage will exist when supply is reduced as described above?
d. Illustrate your answers on a graph.
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