Question

Gas was selling for $3.95/Gallon on Labor Day Weekend of 2012. At last election time (November 2012), the price was $3.15/Gallon. Now, it is $2.40/Gallon.

What causes increases and decreases in the price of gasoline? Use Supply and Demand curves to illustrate your arguments

Answer 1

A decrease in the demand will shift the demand curve to the left and the new equilibrium will be at a lower price and lower quantity,

At the time of election or the labor day the people will demand more and more gasoline, that will increase the demand and increase the price of the goods in the market. but after the demand is decreased the price will fall back.

Point A is the election time and labor day equilibrium. and point B is the normal day equilibrium.