Gas Junkie - Gasoline Prices Questions

Question: Economics Question, I need help!?

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Answer #1:

Shortage of gasoline.

Answer #2:

Assuming that your question is:
1. the cap is on the RETAIL price, then the supply will dry up. In the meantime, the consumer demand would increase sharply, because of potential hoarding. Shortly thereafter, the supply would be essentially zero as the inventory is depleted.
2. if the cap is on the WHOLESALE price, the supply will also contact but probably not as much if there are still a very few low cost producers (if any they have to be producing in Hawaii, and even then, only if they would not be able to ship gasoline elsewhere) who can still earn some small profit. However, the consumer RETAIL price would rise very sharply. The consumer demand would equalize at much higher retail price and a diminished demand. The hoarding should be less because the retail price would go up extremely quickly.

The resulting shortage of gasoline in both scenarios, would probably also lead to smmugling in of supplies which would go towards a black market. In any case, the shortage of gasoline would eventually lead to reduced demand and sharply higher prices.

Answer #3:

If the government offers a $0.25 subsidy per gallon all shall fall in place for suppliers and consumers but if not, then there indeed will be a shortage of gasoline as answered by SDD.

Answer #4:

an excess demand for gasoline (due to the now artificially low price), leading to a shortage of the supply of gasoline





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