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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

The discovery of a large new reserve of crude oil will shift the ________ curve for gasoline, leading to a _________ equilibrium price.

a. supply, higher

b. supply, lower

c. demand, higher

d. demand, lower

To determine

Change in supply and equilibrium price.

Explanation

Option (b):

The discovery of a large new reserve of crude oil will shift the supply curve for gasoline to the right resulting from an increased supply. This pushes the price down, there is a movement along the given demand curve leading to a lower equilibrium price. Thus, option ‘b’ is correct.

Option (a):

The discovery of a large new reserve of crude oil will shift the supply curve for gasoline to the right resulting from an increased supply. This pushes the price down leading to a lower equilibrium price...

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