Price controls on gasoline:

Question

Quizplus · Accepted Answer

Price controls on gasoline, such as setting a maximum price, will create a shortage of gasoline because the demand for gasoline will exceed the quantity supplied at the artificially low price. Consumers may benefit from the lower price, but they will face difficulties finding gasoline to purchase. The shortage may also lead to long lines and rationing, further reducing consumer welfare. Producers, on the other hand, may suffer from lower profits and may reduce their output or exit the market altogether, reducing producer surplus. Therefore, price controls on gasoline do not increase consumer or producer surplus, but rather create market inefficiencies and welfare losses.

Price Controls on Gasoline