The figure below shows the market demand and the market supply curve for gasoline. It would be useful to find the equations of the curves to answer the questions below.

-Refer to the figure above.Suppose that a government regulation mandates a higher quality of gasoline,which raises the marginal cost of each liter by 2.00 euros.Meanwhile,the popularity of hybrid and other energy-efficient vehicles lowers consumers' willingness to pay by 2.00 euros.Then the new equilibrium quantity is ________ and the new equilibrium price ________.

Question

The figure below shows the market demand and the market supply curve for gasoline. It would be useful to find the equations of the curves to answer the questions below.
 
-Refer to the figure above.Suppose that a government regulation mandates a higher quality of gasoline,which raises the marginal cost of each liter by 2.00 euros.Meanwhile,the popularity of hybrid and other energy-efficient vehicles lowers consumers' willingness to pay by 2.00 euros.Then the new equilibrium quantity is ________ and the new equilibrium price ________.

Quizplus · Accepted Answer

The increase in marginal cost due to higher quality gasoline and the decrease in consumers' willingness to pay by the same amount (2.00 euros) would shift both the supply curve upwards and the demand curve downwards, respectively. This would lead to a new equilibrium where the quantity might change, but the price would remain the same as the effects on supply and demand offset each other.

The Figure Below Shows the Market Demand and the Market