D
The demand curve (D) crosses the new supply curve (S2) at a price of $3.75. This is the new equilibrium price. The new equilibrium quantity is lower than it was before the tax at 9,000 gallons of gas.
S2=S1+tax
The government places a $1 tax on each gallon of gasoline that is produced. The new supply curve shifts to the left by the amount of the tax and is represented by the curve S2 = S1 + tax.
Market Equilibrium
The market is initially in equilibrium where the demand curve (D) and supply curve (S1) cross. At the price of $3 a gallon, the number of gallons of gas that consumers want to buy is equal to the amount that the producers want to sell (10,000).
