Question 1: Changes in the Gasoline Market

The changes you mentioned—technological advancements reducing production costs of gasoline and improved fuel efficiency of automobiles—will indeed impact both the supply of and demand for gasoline. Let’s break down the effects on supply and demand and their overall impact on equilibrium price.

Supply of Gasoline:

1. Technological Advancements: When the technology for producing gasoline becomes more efficient, it reduces the costs associated with production. This would lead to an increase in the supply of gasoline. Oil refineries can produce more gasoline at a lower cost, shifting the supply curve to the right.

Demand for Gasoline:

1. Improved Fuel Efficiency: As automobiles become more fuel efficient, consumers need less gasoline to travel the same distances. This decrease in the amount of gasoline demanded is reflected in a leftward shift of the demand curve. However, it’s important to note that this doesn’t necessarily mean people will stop buying gasoline altogether, just that they’ll buy less for the same level of driving.

Overall Effect on Equilibrium Price: Both the increase in supply and the decrease in demand will put downward pressure on the equilibrium price. When supply increases and demand decreases, the market will move towards a new equilibrium point where the price is lower, and the quantity traded will depend on the extent of the shifts in supply and demand.

If the increase in supply outweighs the decrease in demand, the equilibrium price will decrease but the equilibrium quantity might increase, stay the same, or decrease depending on the magnitudes of the shifts. If the decrease in demand is larger than the increase in supply, the equilibrium price will decrease, and the equilibrium quantity will decrease.

Question 2: Minimum Wage and Employment

The statement “Increasing the minimum wage will result in a decrease in employment for workers who now earn less than the new minimum wage” is based on the concept of elasticity of labor demand.

Elasticity Conditions: This statement implies that the demand for labor in this scenario is elastic. Elasticity refers to the responsiveness of quantity demanded to changes in price (in this case, the wage rate). Here’s why this would be the case:

1. High Substitution Possibility: If employers can easily substitute between workers and other factors of production (like automation or capital), then the demand for labor tends to be more elastic. When the minimum wage is increased, the cost of hiring low-wage workers rises, making it more attractive for employers to substitute with other alternatives. This can lead to a reduction in employment of workers who were earning less than the new minimum wage.
2. Large Percentage of Labor Costs: If labor costs constitute a substantial portion of a business’s total costs, changes in wage rates can have a significant impact on the overall cost structure. In such cases, even a relatively small increase in wages (like a minimum wage hike) can lead to noticeable shifts in employment strategies.

Remember that elasticity is a concept that measures responsiveness, and in reality, the relationship between minimum wage changes and employment can be influenced by a variety of factors including the elasticity of labor supply, the specific industry’s characteristics, and overall economic conditions.