Price controls are government restrictions on prices charged for goods and services in the market. Government policies regulating prices can be controversial because they keep prices artificially low and can cause shortages. For example, in 2005, the state of Hawaii passed a price ceiling on the cost of gasoline to fight price gouging. However, in 2006, the governor of Hawaii repealed the law, stating that it was not helping to lower gas prices for Hawaii and that the government should look for alternative ways to limit oil company profits.
How do price ceilings for gas price caps impact the supply curve and the demand curve for gasoline?
What happens to the market when gas price ceilings are less than the equilibrium price? What happens when gas price ceilings are greater than the equilibrium price?
In your opinion, do you think price control policies such as the gas price cap should be used to provide fair pricing in the gasoline industry? Why or why not?