(a) Explain what does the short run US supply curve for gasoline look like? Describe the elasticity.?

Question

(b)How was the supply curve affected by the sharp increase in oil prices that we are currently experiencing over the past few months.

-Gasoline is produced from crude oil by refining. Crude oil is sold in an international market so that prices are essentially uniform the world. Refining capacitity is limited and so only so much gasoline can be produced if all the refineries are fully utilized.

Answer 1

(a) supply curve for gasoline is something middle between elastic and inelastic - because we have some reserves of gas which may cover short-run demand.

(b) Supply curve shifted inward (left or up) due to reduction in supply (supply were redistributed to another countries a bit).