take longer trips, spend more minutes warming up the car in the driveway in wintertime, stop sharing rides to

work, and buy larger cars that get fewer miles to the gallon. However, the below-equilibrium price reduces

gasoline producers’ incentives to produce and sell gasoline, and the quantity supplied falls from 600 to 550.
54 3 • Demand and Supply

When the price is below equilibrium, there is excess demand, or a shortage—that is, at the given price the

quantity demanded, which has been stimulated by the lower price, now exceeds the quantity supplied, which

has been depressed by the lower price. In this situation, eager gasoline buyers mob the gas stations, only to

find many stations running short of fuel. Oil companies and gas stations recognize that they have an

opportunity to make higher profits by selling what gasoline they have at a higher price. As a result, the price

rises toward the equilibrium level. Read Demand, Supply, and Efficiency for more discussion on the
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