Question

An article in the Wall Street Journal recently discussed the market for gasoline in the United States during the summer of 2013. Compared with the previous summer (2012), the article stated that there will be "lower demand, as cars become more efficient" and "growth in production from hydraulic fracturing of shale deposits in the U.S." The demand and supply graph below shows the market for gasoline in summer 2012 Use this graph to analyze the situation described in this article for the summer of 2013. How will this affect the figure for 2013? 

• The demand curve will shift left and the supply curve will shift right 

• The demand curve will shift right and the supply curve will shift left 

• The demand curve and supply curve will both shift right 

• The demand curve and supply curve wilt both shift left

Answer 1

As the demand has decreased it will shift the demand curve to the left, at a lower price and lower output, on the other hand, the production of shale gas will shift the supply curve to the right i.e. at a lower price of the oil and higher output.

The answer is "A", demand curve will shift to the left and the supply curve shift to the right.