Hurricane Katrina damaged a large number of oil refineries in the Gulf Coast, causing a large increase in crude oil prices (crude oil is a key input in producing gasoline). After the hurricane came, all consumers expected that the gasoline price would rise in the future. Suppose that the gasoline market is at equilibrium prior to the hurricane.
a. Use a graph to show all the effects on the gasoline market. Briefly explain what would happen to the equilibrium price and quantity.