The market for gasoline in May is in equilibrium, at a market clearing price of $4.50 per gallon. After Memorial Day, the demand curve for gasoline increases, which causes
A)the demand curve for gasoline to shift to the right, creating a shortage at $4.50 per gallon which causes the market clearing price of gasoline to rise.
B)the demand curve for gasoline to shift to the right, creating a shortage at $4.50 per gallon which causes the market clearing price of gasoline to fall.
C)the demand curve for gasoline to shift to the left, creating a shortage at $4.50 per gallon which causes the market clearing price of gasoline to rise.
D)the demand curve for gasoline to shift to the left, creating a shortage at $4.50 per gallon which causes the market clearing price of gasoline to fall.

Question

Quizplus · Accepted Answer

An increase in demand shifts the demand curve to the right. At the initial equilibrium price of $4.50 per gallon, there is now excess demand (or a shortage) because consumers want to purchase more gasoline at this price than suppliers are willing to supply. This excess demand will cause the market clearing price of gasoline to rise, as suppliers have the ability to charge a higher price to sell all of their available gasoline.

The Market for Gasoline in May Is in Equilibrium, at a Market