Explain the effect of a decrease in price of gas on the demand for petrol with the aid of a diagram?

When the price of gas decreases, it typically leads to a decrease in the price of petrol as well. This decrease in price has an effect on the demand for petrol, which can be explained using a demand and supply diagram.

In the diagram, the vertical axis represents the price of petrol, and the horizontal axis represents the quantity of petrol demanded. The demand curve for petrol slopes downward from left to right, indicating that as the price of petrol decreases, the quantity demanded increases.

When the price of gas decreases, it reduces the cost of production for petrol, leading to a decrease in the price of petrol. This decrease in price is represented by a leftward shift of the demand curve for petrol. The new demand curve intersects the original supply curve at a lower price and a higher quantity of petrol demanded.

As a result, consumers are more willing and able to purchase petrol at the lower price, leading to an increase in the quantity demanded. This increase in quantity demanded is shown by a movement along the demand curve from the original equilibrium point to a new equilibrium point with a higher quantity and a lower price.

Overall, a decrease in the price of gas leads to a decrease in the price of petrol, which in turn increases the demand for petrol as consumers are more willing to purchase it at the lower price.