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in demand, and a change in the quantity demanded. ■ 0 Price (dollars per gallon) ■ Equilibrium
price 2.50 The combined effects of these two factors left the demand
for gasoline the same in 2008 as it had been in 2007.
The price of crude oil was the biggest influence on the
market for gasoline during 2007 and 2008. 3.50 2.75 Slightly higher incomes increased demand and the gradual move toward hybrid vehicles and the increased use
of ethanol decreased demand. ■ S2007 4.00 3.00 Two main factors influenced the demand for gasoline in
the year to April 2008. ■ 4.50 The demand curve does not shift, but as the price of
gasoline rises, the quantity of gasoline demanded decreases in a movement along the demand curve D. 73 9160335_CH03_p053-080.qxd 6/22/09 8:56 AM Page 74 CHAPTER 3 Demand and Supply 74 MATHEMATICAL NOTE ◆ Demand, Supply, and Equilibrium
The law of demand says that as the price of a good
or service falls, the quantity demanded of that good
or service increases. We can illustrate the law of
demand by drawing a graph of the demand curve or
writing down an equation. When the demand curve
is a straight line, the following equation describes it:
P = a - bQ D,
where P is the price and Q D is the quantity
demanded. The a and b are positive constants.
The demand equation tells us three things: a The law of supply says that as the price of a good
or service rises, the quantity supplied of that good
or service increases. We can illustrate the law of supply by drawing a graph of the supply curve or writing down an equation. When the supply curve is a
straight line, the following equation describes it:
P = c + dQ S,
where P is the price and Q S is the quantity supplied.
The c and d are positive constants.
The supply equation tells us three things:
1. The price at which sellers are not willing to
supply the good (Q S is zero). That is, if the
price is c, then no one is willing to sell the
good. You can see the price c in Figure 2. It is
the price at which the supply curve h...
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