Since car gasoline is an inelastic good, would it be a good idea to put a price ceiling on car gasoline?
Akin B asked:
I am aware that it would keep the car gas market from maximizing profits. Since the car gas market has negatively effected other markets in the US, a 1 year price ceiling might not be too bad.
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I am aware that it would keep the car gas market from maximizing profits. Since the car gas market has negatively effected other markets in the US, a 1 year price ceiling might not be too bad.
Also this strategy would only work for the short-term.
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May 21st, 2009 at 1:16 am
Not really…any binding price ceiling causes shortages. We tried this strategy in the 1970s, and it didn’t work so well.
It would be especially bad in the global economy. If Americans aren’t willing to pay for the oil, it will be sold to other nations who will. That would decrease the supply curve in the US, in addition to decreasing the quantity supplied.
May 23rd, 2009 at 2:54 pm
Absolutely not. The way governments work, it would be $100 a barrel for the gas, and $200 to keep track of where it goes. Then there’ll be the bootleg gas, and the black tankers, and another police force, and branch of the IRS to stop gas smuggling. Even the thought is a disaster.
May 25th, 2009 at 10:02 am
Price ceilings always sound good to the people, but are absolutely always a bad idea. There is no debate on the subject.