Prior to beginning this activity you should have:
  • Viewed Lessons 3.1 and 3.2
  • Identified and defined the terms market equilibrium, excess demand, and excess supply.
  • Reviewed the example of how we can graph supply and demand using a single graph and locate the market equilibrium price and quantity.

Activity 3.3 - What you need to do:

A. Given the demand and supply schedules listed below, create an accurate supply and demand curve on a single graph.
Be sure to properly label the demand curve, the supply curve, the X-axis, and the Y-axis . (So that there is no mistake about how your supply and demand curves are plotted, it is recommended that you use graph paper or a computer graphing program of your choice.)

B. Identify the price and the quantity of gasoline at which market equilibrium is achieved.

C. Answer questions 1-4 below using the information that you have learned from Activity 3.3. Be sure to answer the questions completely.

The following charts represent the demand and supply schedules for gasoline at a single gas station in Astor, FL during the month of October.


Demand for gasoline
Supply for gasoline
Price per gallon
Gallons per week (x 1000)
Price per gallon
Gallons per week (x 1000)
.25
35
.25
5
.50
30
.50
10
.75
25
.75
15
$1.00
20
$1.00
20
$1.25
15
$1.25
25
$1.50
10
$1.50
30
$1.75
5
$1.75
35

1. At a price of $1.50 per gallon, would there be a surplus or a shortage of gasoline at this particular gas station? How many gallons of gasoline would the shortage or surplus of gasoline be at this price? In addition to providing the correct response to these questions, provide a written description that supports your answer.

2. At a price of .50 cent per gallon, would there be a surplus or a shortage of gasoline at this particular gas station? How many gallons of gasoline would the shortage or surplus of gasoline be at this price? In addition to providing the correct response to these questions, provide a written description that supports your answer.

If you need to, go back and review the Law of Supply and Law of Demand to answer the following questions:

3. Suppose new technological developments in how crude oil is refined reduce the cost of producing gasoline. What would this mean to both consumers and producers in relationship to the price of gasoline and the amount of gasoline supplied? Please explain your answer.

4. The vast majority of the US gasoline supply comes from countries in the Middle East, primarily Saudi Arabia and Kuwait. What would be the potential impact on US consumers and suppliers of gasoline if war broke out amongst Middle Eastern nations? Please explain your answer.


Grading rubric for this activity
Properly graphing the above supply and demand schedules on one graph: 10 points
Properly labeling the X and Y axis on the graph: 5 points
Identifying the market equilibrium price: 2 points
Properly answering questions 1 - 4: 8 points
subtotal: 25 points X 4
Assignment total: 100 points

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