Scenario: Suppose the retail market for gasoline in Wyoming is characterized by the following demand and supply schedules and corresponding supply-demand graph
Demand: Qᵈ (p) = 24 - 6 ∙ p,
Supply: Qˢ (p) = 4 ∙ p,
where price p is in dollars per gallon, and quantity Q is millions of gallons.

-Refer to the scenario above.Wyoming imposes a $1 per gallon price ceiling on retail gasoline in the state.At the price ceiling,there is ________ of ________ gallons.Illustrate your answer with a graph.

Question

Scenario: Suppose the retail market for gasoline in Wyoming is characterized by the following demand and supply schedules and corresponding supply-demand graph
Demand: Qᵈ (p) = 24 - 6 ∙ p,
Supply: Qˢ (p) = 4 ∙ p,
where price p is in dollars per gallon, and quantity Q is millions of gallons.
 
-Refer to the scenario above.Wyoming imposes a $1 per gallon price ceiling on retail gasoline in the state.At the price ceiling,there is ________ of ________ gallons.Illustrate your answer with a graph.

Quizplus · Accepted Answer

The price ceiling is set at $1/gallon, which is below the equilibrium price of $4/gallon where the demand and supply curves intersect. At this price ceiling, the quantity demanded is 24-6(1) = 18 million gallons, while the quantity supplied is 4(1) = 4 million gallons. Therefore, there is a shortage of 18-4 = 14 million gallons.

Graphically, we can see that the price ceiling creates a binding constraint on the market, causing the quantity demanded to exceed the quantity supplied at the price ceiling. The area of the shortage can be calculated as the difference between the quantity demanded and the quantity supplied at the price ceiling, which is a triangular area on the graph.

Scenario: Suppose the Retail Market for Gasoline in Wyoming Is