Consider the demand for gasoline. Suppose the supply of gasoline does not change; for each of the following taken separately, say whether the result of the event listed will be a movement along the unchanged demand curve, OR a shift in the whole demand curve; and whether the equilibrium quantity purchased will increase or decrease. Circle correct answers. [Square brackets are around the right answers]

OK, you did this before we really had done any practice or maybe got the ideas completely clear. So if you got some of it, well done.

'Demand,' or the 'demand curve' or 'demand schedule' means <the quantities people would want to buy at all the different possible prices, IF nothing else changes>. So it is how quantity people want to buy varies with price, nothing else changed. So we can draw a line showing how the quantity people want to buy changes as price of this good changes, and that is 'demand' or the 'demand curve.' So the ONLY thing that can make us "move along the unchanged demand curve" is a change in the price of the good itself; NOTHING else can do that. If something else changes, it will either "shift the whole demand curve,", i.e. <change demand>, OR do nothing (if it is irrelevant to how much people would want to buy of this good). The way to figure out if a change in something else would shift the demand curve is to use common sense: if the price of the good does not change, but this other change happens, at that fixed price will the quantity people want to buy go up (demand increases), go down (demand decreases), or stay the same (demand does not change).

The questions are only about demand, implicitly we are assuming supply does not change. So for the "equilibrium quantity purchased" part of the question we are imagining an unchanged supply curve; if the demand has increased [shifts out to the right], the quantity purchased will increase; if demand has decreased [shifts in to the left], the quantity purchased will decrease -- think about which way where the two curves intersect has to move.

a. A change in technology of engines makes new cars much more fuel-efficient.

Idea is each car goes further on each gallon of gas, so at same price of gas, people will want to buy less gas as they get the new cars. Demand shifts in to the left, quantity purchased decreases.

b. An increase in consumer incomes.

Should be obvious; people have higher incomes, at same price for gas they will want to buy more, demand shifts out to the right, quantity purchased increases.

c. A large increase in air fares on short and medium distance domestic routes.

Idea here is that some people who used to fly will now choose to drive because it is cheaper, so demand for gas shifts out to the right (at same price for gas people would want to buy more), more gas is purchased.

d. Because of massive oil finds in the South China Sea, expectation that the price of gasoline will fall in the future when supply increases.

This one is a little forced, but the idea is if you believe the price will go down in the near future, you will postpone purchases if you can -- so at an unchanged price, you will buy less; demand shifts in, less is bought (until the price does go down).

e. Because of new discoveries about environmental and health damage from gasoline engine emissions, new emission abatement regulations that significantly increase the price of cars and trucks.

Price of cars and trucks goes up, so people buy less of them, so at unchanged price they buy less gas, demand curve shifts in to the left and less gas is purchased.