Should a price ceiling (limit) be imposed on gasoline prices in the U.S market?
ID: 1216579 • Letter: S
Question
Should a price ceiling (limit) be imposed on gasoline prices in the U.S market? I feel a price ceiling should not be imposed on gasoline prices in the U.S. market unless there is an emergency, crisis or shortage. On the news you here the possibilities of lowering the gas price or putting a price ceiling on it to stimulate the economy and help it grow. Some believe this may help to ease consumers’ pockets in times of a recession. I don’t really understand how that works when at the same time prices rise at the grocery store. What’s the point of paying less money for gas if you’re going to give it back on bread and milk? I guess there is no real answer to the question without a positive statement. Can an economist prove that putting a price ceiling on gas will for sure grow the economy? Taking it one step further, what about the loss of sales for bread and milk when consumers decide to forego those products and replace them with substations. Not to mention more layoffs at bread and milk companies. Recently I started watching the business news on television. Now along with economics studies I’m starting to realize everything is a tradeoff and has an opportunity cost! Please tell me your opinion about this answer.
Explanation / Answer
Price ceiling means the government fixes the maximum price which a producer can charge, If it is below equilibrium price then it will create shortage as AD>AS at that price.
To control prices. the government takes these initiatives. If the government will not control prices then there will be a huge inflation in an economy. It is not true that controlling the price of one good will increase the price of an another good. Even after price ceiling, normal goods will be available at the same price. It is just that the government will make a provision to provide gasoline at a normal rate tosmoothen the price effect.