Let D₀ and S₀ be the initial demand and supply curves for gasoline. Let P₀^* and Q₀^* be the initial equilibrium in this market. There is an increase in incomes due to a tech boom. Which ONE of the following correctly captures the effect of this change on the market for gasoline?

Question

Quizplus · Accepted Answer

An increase in incomes due to a tech boom will lead to an increase in the demand for gasoline. This will cause the demand curve to shift to the right (from DS1U1B10S1U1B0 to DS1U1B10S1U1B1), leading to a new equilibrium at a higher quantity and price (point S1U1P1). Therefore, both equilibrium quantity and price will increase.

Let D0 and S0 Be the Initial Demand and Supply

Let D₀ and S₀ Be the Initial Demand and Supply