Use the Following to Answer Questions

question 208

Multiple Choice

Use the following to answer questions:
Figure: Demand and Supply of Gasoline
-(Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. The initial equilibrium price and quantity (at intersection of S₁ and D) of gasoline are:

• A)$2.00 and 450 gallons.
• B)$1.50 and 400 gallons.
• C)$2.00 and 200 gallons.
• D)$2.50 and 300 gallons.

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Definitions:

Base Year

A specific year against which economic or financial data is measured and compared.

Chain-Weighted Index

An economic measure that accounts for changes in both prices and quantities of goods and services over time, adjusting the weightings to better reflect reality.

Laspeyres Index

A price index used to measure the change in the cost of acquiring a fixed basket of goods and services of the same type and quantity over time.

Paasche Index

A price index that measures the cost of purchasing a given market basket of goods and services in a certain year, compared to the cost of purchasing the same goods and services in a base year, with the quantities used in weighting the prices coming from the year of interest rather than the base year.