Illustrates the interaction (equilibrium point) of demand and supply in the market for petrol based on the table below. And explain following conditions. [5 Marks]
A)Show excess supply (surplus of petrol) and excess in Demand (shortage of petrol) in the same graph and explain.
B)Suppose the government decided that, since petrol is a necessity, its price should be legally capped at $1.30 per
gallon. What do you anticipate would be the outcome in the petrol market if at this price quantity supplied in the market is 575 Millions of gallons?
Price (per gallon in $) Quantity Demanded (millions of gallons)
Quantity Supplied (millions of gallons)
1.00 800 500
1.20 700 550
1.40 600 600
1.60 550 640
1.80 500 680