Discussion:
Use the data given in Problem 7 on page 77 of the text to answer the following questions:
a) what is the equilibrium price?,
b) if supply at every price is reduced by 10 gallons, what will the new equilibrium price be?,
c) if the government freezes the price of gasoline at its initial equilibrium price, how much of a surplus or shortage will exist when supply is reduced as described above?, and
d) illustrate your answers on a graph.