Question
In 1973 Arab countries imposed an oil embargo on the United States and other developed countries in the aftermath of the Yom Kippur war. At the same time improved infrastructure and increased income was altering consumer preferences in favor of automobiles over public transportation. If you were drawing a supply and demand graph to illustrate the change in the gasoline market in 1973-1974, what would you say has happened to the supply and demand curves and the equilibrium price and quantity during this time period?
A The demand for gasoline will decrease shifting the curve to the left while the supply curve also shifts to the left. As a result the equilibrium price will increase but it is impossible to pinpoint the equilibrium quantity change.
B The supply of gasoline will decrease shifting the curve to the left while the demand curve shifts to the right. As a result the equilibrium price will increase but it is impossible to pinpoint the equilibrium quantity change.
C The demand for gasoline will decrease shifting the curve to the left while the supply curve shifts to the right. As a result the equilibrium quantity will increase but it is impossible to pinpoint the equilibrium price change.
This question is taken from Econ 002 – Principles of Macroeconomics » Winter 2021 » Module 3 Quiz
