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To think about the wider impact of Hurricane Katrina on supply and demand

To think about the wider impact of Hurricane Katrina on supply and demand, let's consider the market for gasoline in Colorado, a state far enough from Louisiana that it is not immediately affected by disruptions in oil infrastructure. The following graph shows the supply and demand for gasoline in Colorado. The curves D1 and S1 show the demand and supply of gasoline in Colorado on an average day in late summer. The supply curve is vertical because on any given day, the amount of gasoline already delivered to gas stations is fixed.

 
 
 

A "run on gasoline" occurs whenconsumers' fears of gas shortages in the future lead them to demandmore gasoline now. Using supply and demand analysis, which of thefollowing is consistent with this situation?

    (A) A supply shift from S1 to S2
 
    (B)   A demand shift from D1 to D2
 
    (C)   A simultaneous demand shift from D1 toD2 and supply shift from S1 to S2

 

 

Apr 23 2018 View more View Less

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