If the equilbrium price of gasoline is $3.00 per gallon and the government will

Question

If the equilbrium price of gasoline is $3.00 per gallon and the government will not allow oil companies to charge more than $3.50 per gallon of gasoline, which of the following will happen? The market will be in equilibrium at a price of $3.00. Supply must eventually ncrease so that the market will come into equilibrium at a price of $2.00 Demand must eventually decrease so that the market will come into equilibrium at price of $2.00. The market will be in equilibrium at a price of $3.50 per gallon of Gasoline

Explanation / Answer

Correct option is (1).

When government fixes an upper limit for a price, it is called ceiling price. A ceiling price is binding only if it is imposed below the equilibrium price, otherwise a ceiling price has no effect on equilibrium.

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.