Question

Review Figure 3.4. Suppose the government decided that, since gasoline is a necessity, its price should be legally capped at $\$1.30$per gallon. What do you anticipate would be the outcome in the gasoline market?

Short answer

Quantity demanded will be more than the amount provided. Thus there would be a deficiency of gasoline in the market.

Step-by-step solution

Concept introduction

Let us consider the question. The lawfully covered shows the price ceiling above which an item can't be sold. The government has lawfully covered the cost of fuel which means the market cost isn't permitted to increment above .accordingly, the amount requested will be more than the amount provided. Subsequently, there would be a lack of gas in the market.

Explaining the situation

In the present circumstance, a few clients who will not be ready to buy gas go unsatisfied. Dealers of the item will likewise experience because of the price ceiling. The nature of fuel may likewise decline.