After the OPEC oil embargo in the 1970s, price controls were placed on gas markets that did not allow price to rise to the market-clearing level. Gas shortages resulted as did black markets. Use the analysis provided in Chapters 1- 6 on the use of price controls to discuss whether price controls likely hurt or helped consumers and the economy. Consider the following:
· Who is helped and harmed by price ceilings?
· Had gas prices been allowed to increase sharply, would we have made changes in our economy faster? At what cost?
· How does the elasticity of demand and supply impact the degree to which price and quantity would change in the gasoline market?