There is a shortage of gasoline at one dollar per gallon. the equilibrium price for gasoline is

a. one dollar per gallon
b. less than one dollar per gallon
c. more than one dollar per gallon
d. not calculable

The correct answer is C.

At the equilibrium point the market clears. This means that the amount demanded equals the amount supplied and that the desires of the producers and consumers that participate have been fulfilled.

When there is a shortage of gasoline (or excess demand), it means that the amount demanded by consumers at a specific price level is greater than the amount supplied by producers. Therefore, the adjustment mechanism of the market will operate, increasing the amount charged for gasoline, so that less consumers are willing to purchase it at a higher price. Adjustment will continue happening, and prices will continue growing, until the amounts supplied and demanded meet and an equilibrium is reached. Therefore, the equilibrium price for gasoline is greater than one euro per gallon.

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