Problem
The short-run price elasticity of demand for gasoline at the pump is currently 0.25. Suppose that due to international hospitalities, the crude oil supplies is cut off, which results in a drop of 15% of US supplies of refinded gasoline.
Find:
a) the new price after the cut off, when the current price is $3 a gallon.
b) what would happen if the US government imposes a price ceiling on gas at $3 per gallon.
c) under the price ceilings scenario, would the quantity demanded or quantity supplied determine how much gas is purchased.
d) Would it be the same without the price ceiling scenario would you answer in c see be the same when there is no price ceiling policy).
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.