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Scenario: Suppose that the government imposes a price control on gasoline where the legal price is ...

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Scenario: Suppose that the government imposes a price control on gasoline where the legal price is ...

Scenario: Suppose that the government imposes a price control on gasoline where the legal price is set at $1.50 per gallon while the equilibrium price would be $2.25. A shortage ensues. Worried that you may not have enough gas to commute to school and do errands, you get up before dawn to go to a gas station to fill up the tank. But you find yourself waiting in a long line. Fortunately, the station did not run out of gas before your turn came up, and you were happy to drive away with a full tank.

Refer to the scenario above. Your total cost of getting gas ________.

▸ may be higher than the equilibrium price because of your opportunity cost of waiting in line and uncertainty about availability of gasoline

▸ is exactly the same as the equilibrium price because you managed to get gas

▸ may be higher than the equilibrium price because the seller usually charges an illegally higher price

▸ is lower than the equilibrium price thanks to the price ceiling

Textbook

Macroeconomics

Edition: 3^rd

Authors: Acemoglu, Laibson, List

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