Suppose you are told that the equilibrium price of gasoline has increased, while the equilibrium quantity of gasoline has fallen. You are also told that either the demand changed or supply changed, but not both. Which of the following must have occurred?
A)Demand increased.
B)Demand decreased.
C)Supply increased.
D)Supply decreased.

Question

Quizplus · Accepted Answer

If the equilibrium price of gasoline has increased while the equilibrium quantity has fallen, it means there has been a decrease in the supply of gasoline. This is because a decrease in supply leads to a decrease in quantity and an increase in price. If there had been a change in demand, the equilibrium price and quantity would have moved in the same direction. Therefore, supply must have decreased.

Suppose You Are Told That the Equilibrium Price of Gasoline