Let D₀ and S₀ be the initial demand and supply curves for gasoline. Let P₀^* and Q₀^* be the initial equilibrium in this market. The war in Iraq comes to an end. Iran and Afghanistan lay pipes to generate more oil. US and Venezuela enter an era of friendship. Which ONE of the following correctly captures the effect of this change on the market for gasoline?

Question

Quizplus · Accepted Answer

The end of the war and increased oil production will increase the supply of gasoline, shifting the supply curve to the right. This will lead to a higher equilibrium quantity and a lower equilibrium price.

Let D0 and S0 Be the Initial Demand and Supply

Let D₀ and S₀ Be the Initial Demand and Supply