Let D₀ and S₀ Be the Initial Demand and Supply

question 30

Multiple Choice

Let D₀ and S₀ be the initial demand and supply curves for gasoline. Let P₀^* and Q₀^* be the initial equilibrium in this market. There is an increase in incomes due to a tech boom. Which ONE of the following correctly captures the effect of this change on the market for gasoline?

• A) Both equilibrium quantity and price will increase
• B) Both equilibrium quantity and price will decrease
• C) Equilibrium quantity will increase, but equilibrium price will decrease
• D) Equilibrium quantity will decrease, but equilibrium price will increase

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Definitions:

Utility Function

A mathematical representation in economics that describes how different goods or bundles of goods satisfy a consumer's needs and preferences.

Budget Constraint

An economic model representing all the combinations of goods and services a consumer can afford, given their income and the prices of goods.

Income

The financial gain or money received by an individual or household from various sources like work, investments, or transfers, over a period of time.

Apples

A popular fruit known for its variety and nutritional value often used in culinary dishes and beverages.