Just before the Persian Gulf War, suppliers of gasoline held back the supply of gasoline they were willing to sell. This action was an example of which of the determinants of supply?A.Government actionsB.Number of sellersC.Resource PricesD.Prices of other goodsE.Expectations
Question
Just before the Persian Gulf War, suppliers of gasoline held back the supply of gasoline they were willing to sell. This action was an example of which of the determinants of supply?A.Government actionsB.Number of sellersC.Resource PricesD.Prices of other goodsE.Expectations
Solution
The action of suppliers holding back the supply of gasoline they were willing to sell just before the Persian Gulf War is an example of the determinant of supply known as "Expectations".
Here's the step-by-step reasoning:
A. Government actions: This option refers to policies or regulations that could affect the supply, such as taxes or subsidies. In this case, the action was taken by suppliers, not the government.
B. Number of sellers: This refers to how many providers or businesses are in the market. The scenario doesn't mention any change in the number of sellers.
C. Resource Prices: This would be relevant if the costs of producing gasoline (like the price of crude oil or the cost of refining) had changed. The scenario doesn't mention this.
D. Prices of other goods: This refers to the situation where a change in the price of one good affects the supply of another. The scenario doesn't mention any other goods.
E. Expectations: This refers to suppliers' predictions about future market conditions. In this case, the suppliers were likely expecting the Persian Gulf War to disrupt oil supplies, leading to higher gasoline prices in the future. By holding back their supply, they could potentially sell it later for a higher price. So, this is the correct answer.
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