Suppose Congress passes a law that states the price of gasoline may not exceed $6 per gallon (but may be lower). If the current price of gasoline is less than $6, what impact does this law have on the current price and quantity of gasoline in the US market?

Question

Quizplus · Accepted Answer

The law currently has no impact, and the market clears at the equilibrium price. Since the current price of gasoline is already lower than the maximum price set by the law, the law does not have any impact on the market. The market will continue to operate at the equilibrium price, where quantity supplied equals quantity demanded.

Suppose Congress Passes a Law That States the Price of Gasoline