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Chapter 3: Q.36 (page 79)

Review Figure 3.4. Suppose the government decided that, since gasoline is a necessity, its price should be legally capped at $1.30per gallon. What do you anticipate would be the outcome in the gasoline market?

Short Answer

Expert verified

Quantity demanded will be more than the amount provided. Thus there would be a deficiency of gasoline in the market.

Step by step solution

01

Concept introduction

Let us consider the question. The lawfully covered shows the price ceiling above which an item can't be sold. The government has lawfully covered the cost of fuel which means the market cost isn't permitted to increment above .accordingly, the amount requested will be more than the amount provided. Subsequently, there would be a lack of gas in the market.

02

Explaining the situation

In the present circumstance, a few clients who will not be ready to buy gas go unsatisfied. Dealers of the item will likewise experience because of the price ceiling. The nature of fuel may likewise decline.

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Most popular questions from this chapter

How does a price ceiling set below the equilibrium

level affect quantity demanded and quantity supplied?

Table 3.10 shows the supply and demand for movie tickets in a city. Graph demand and supply and identify the equilibrium. Then calculate in a table and graph the effect of the following two changes.

a. Three new nightclubs are open. They offer decent bands and have no cover charge, but make their money by selling food and drink. As a result, demand for movie tickets falls by six units at every price.

b. The city eliminates a tax that is placed on all local entertainment businesses. The result is that the quantity supplied of movies at any given price increases by 10%.

Use the four-step process to analyze the impact of a reduction in tariffs on imports of iPods on the equilibrium price and quantity of Sony Walkman-type products.

Will demand curves have the same exact shape in all markets? If not, how will they differ?
  1. Many changes are affecting the market for oil. Predict how each of the following events will affect the equilibrium price and quantity in the market for oil. In each case, state how the event will affect the supply and demand diagram. Create a sketch of the diagram if necessary.
    a. Cars are becoming more fuel efficient, and therefore get more miles to the gallon.
    b. The winter is exceptionally cold.
    C. A major discovery of new oil is made off the coast of Norway.
    d. The economies of some major oil-using nations, like Japan, slow down.
    e. A war in the Middle East disrupts oil-pumping schedules.
    f. Landlords install additional insulation in buildings.
    g. The price of solar energy falls dramatically.
    h. Chemical companies invent a new, popular kind of plastic made from oil.
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