The market for gasoline in May is in equilibrium, at a market clearing price of $2.50 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 $2.50 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 $2.50 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 $2.50 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 $2.50 per gallon which causes the market clearing price of gasoline to fall.

Question

Quizplus · Accepted Answer

When the demand curve shift to the right, the quantity demanded increases at every price, causing a shortage at the existing price of $2.50 per gallon. This shortage leads to an increase in the market clearing price of gasoline. Therefore, the best choice is A.

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