7/30/2017 4:16 PM

-Refer to Situation 4-1.An economist would have most likely predicted that once price controls were abolished in the spring of 1974,
A) the price of gasoline would decline sharply.
B) the surplus of gasoline would go away.
C) the shortage of gasoline would go away.
D) the demand for gasoline would decrease.
E) both c and d

Question

7/30/2017 4:16 PM
 
-Refer to Situation 4-1.An economist would have most likely predicted that once price controls were abolished in the spring of 1974,
A) the price of gasoline would decline sharply. 
B) the surplus of gasoline would go away. 
C) the shortage of gasoline would go away. 
D) the demand for gasoline would decrease. 
E) both c and d

Quizplus · Accepted Answer

Price controls create a shortage of gasoline because they lower the price of gasoline below the market equilibrium price, causing an excess of demand over supply. When price controls are abolished, the market equilibrium price is allowed to be set and the shortage of gasoline created by the price controls will go away.

7/30/2017 4:16 PM -Refer to Situation 4-1.An Economist Would Have Most Likely Predicted