Econ 203 Mid-term Workforce
Assessment
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Econ 203 Mid-term Workforce
Assessment: Shocks in the Market for Gas
A key skill in economics is the
ability to use the theory of supply and demand to analyze specific markets. In
this assessment, you will demonstrate your ability to analyze the effects of
several “shocks” on the market for gas at service stations.
Carbon tax: Suppose the government
imposes a carbon tax on oil production.
- Will this affect the supply or the demand for gasoline?
Why? Which determinant of demand or supply is being affected?
- Show graphically with before and after curves on the
same axes.
- How will this change the equilibrium price and quantity
of gasoline? Explain your reasoning. (Be sure to identify which of the
following apply: the cost of production, a change in technology, tastes
and preferences, income, the price of substitutes or the price of
complements affects equilibrium price and equilibrium quantity)
- Electric cars: Now consider the invention of cheap
electric vehicles.
- Explain how you imagine the invention of cheap electric
cars would affect the market (demand or supply) for gasoline? Why?
Which determinant of demand or supply would be affected?
- Show graphically with before and after curves on the
same axes.
- How will this change the equilibrium price and quantity
of gasoline? Explain your reasoning. (Be sure to identify which of the
following apply: the cost of production, a change in technology, tastes
and preferences, income, the price of substitutes or the price of
complements affects equilibrium price and equilibrium quantity)
- Combine Cases 1 and 2: Suppose that a carbon tax is
imposed and electric cars become common.
- What will the combined impact be on the equilibrium
price and quantity of gasoline? Explain your reasoning and show
graphically.
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