Answered: 1.75 If there's a price-gouging law in…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

If there's a price-gouging law in effect preventing gas stations from raising prices, then there will be an excess *blank* of *blank* million gallons of gas.

Suppose the government wants to alleviate the market imbalance. The best policy solution is to impose *blank*, and the *blank* would be $ *blank* million. (Include two decimal places.)

(I answered the first part of the question, I'm just stuck on the second part of it.)

Certainly! Here's the transcribed text and a detailed description of the graph:

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**Graph Description:**

The graph is a standard supply and demand graph with price (P) on the vertical axis and quantity (Q) on the horizontal axis. It includes:

- **Demand Curve (D):** Downward sloping, indicating that as price decreases, quantity demanded increases.
- **Supply Curve (S):** Upward sloping, showing that as price increases, quantity supplied increases.
- **Price Lines:** Horizontal lines at different price points—$3.25, $2, and $1.75—that intersect the supply and demand curves at various points.

**Text:**

If there's a price-gouging law in effect preventing gas stations from raising prices, then there will be an excess of [Dropdown] million gallons of gas.

Suppose the government wants to alleviate the market imbalance. The best policy solution is to impose [Dropdown] and the [Dropdown] would be $ [Dropdown] million. (Include two decimal places.)

Please answer all parts of the question.

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For educational purposes, you can further explain concepts like equilibrium, surplus, and shortage using the graph's data points.

This graph represents a supply and demand model, commonly used in economics to depict market equilibrium.

### Axes
- **Vertical Axis (P):** Represents the price levels.
- **Horizontal Axis (Q):** Represents the quantity.

### Lines
- **D (Demand Curve):** Slopes downward from left to right, indicating that as price decreases, the quantity demanded increases.
- **1 and 2 (Supply Curves):** Slope upward from left to right, indicating that as price increases, the quantity supplied increases.

### Key Points and Lines
- Horizontal lines at **1.75**, **2**, **3**, and **3.25** indicate specific price levels.
- Vertical lines at **4**, **8**, and **9** indicate specific quantities.

### Intersections
- The interaction of the demand curve (D) and supply curves (1 and 2) determines the equilibrium points, where quantity supplied equals quantity demanded.

The graph is useful for analyzing changes in market conditions, such as shifts in supply and demand, and their effects on price and quantity.

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