2006-09-21 05:12:41 · 11 answers · asked by sistermoon 4 in Social Science ➔ Economics
Price ceilings are bad in the view of an economist because it can create a supply shortage. Gas companies will not be willing to produce fuel if they cannot make a profit. I f they have to buy gas at $3 a gallon and there is a price ceiling of $3 a gallon, then the company will not produce gas because they cannot afford the production costs, hence there will be a shortage of gas in the market. When the U.S. government set maximum prices for gasoline in 1973 and 1979, dealers sold gas on a first-come-first-served basis, and drivers got a little taste of what life was like for people in the Soviet Union: they had to wait in long lines to buy gas. The true price of gas, which included both the cash paid and the time spent waiting in line, was often higher than if prices were not controlled at all. At one time in 1979, for example, the U.S. government fixed the price of gasoline at about $1.00 per gallon. If the market price would have been $1.20, a driver who bought ten gallons apparently saved $.20 per gallon, or $2.00. But if the driver had to line up for thirty minutes to buy gas, and if her time was worth $8.00 per hour, the real cost to her was $10.00 for the gas and $4.00 for the time, an overall cost of $1.40 per gallon.
2006-09-21 05:27:14 · answer #1 · answered by btg2281 1 · 0⤊ 0⤋
Because it doesn't do anything to ensure availability. It doesn't lower the cost of production or distrubution, nor does it impact the reliability of supply. As a result, you can have gas stations that display low gas prices, but have no gas to sell.
In the Soviet Union, there were price ceilings on everything; as a result, the only thing they had in stores were price tags with affordable prices on them.
You may also think about it this way. High gasoline prices hurt most those who have the highest ratio of gasoline spending to disposable income. The pain, while real, is direct and focused. Gasoline price ceilings would hurt everyone, because people would waste enormous amounts of time in lines to gas stations (as they did during the last energy crisis). This pain would be no less real, but indirect and dispersed.
2006-09-21 09:08:03 · answer #2 · answered by NC 7 · 0⤊ 0⤋
Price Ceiling On Gas
2016-10-15 06:14:12 · answer #3 · answered by Anonymous · 0⤊ 0⤋
It would consitute restraint of trade, and the producers could price it at the maximum when it didn't need to be there. The reason that gasoline had remained relatively low cost is because if it got too expensive, auto manufacturers would come up with vehicles that didn't require as much, or any ot use. This would put OPEC in a bind, because they're high production levels wouldn't be necessary any longer. If we could use hydrogen or electricity to power our vehicles, what would all those Arabs do with all their oil? They'd have a surplus and the price would fall dramatically.
2006-09-21 05:23:55 · answer #4 · answered by Anonymous · 0⤊ 0⤋
For one, to put a cap on the price of fuel is not the free market system, and yes it does put hardship on people, but do you see the state and federal government offering to drop the taxes they charge on fuel? They don't even have to do a thing to make money except hold their hand out, and the oil companies cannot own refineries by law, most of the problem is accidents, refitting old ones that are wore out, and the fact most people don't want a refinery in their back yards and fight the building of new ones, 20 years ago there was 337 refineries operating in US, there is just over 150 now, and a lot more people now than 20 yrs ago, so any disruption in the flow of oil and the increased demand = higher prices.
2016-03-14 01:08:27 · answer #5 · answered by Anonymous · 0⤊ 0⤋
Because when it comes to pricing everything has to be relative. To put a ceiling on prices, i.e. sell them for less than they're actually worth isn't very economical, hence economists don't like it.
2006-09-21 05:20:44 · answer #6 · answered by Anonymous · 0⤊ 1⤋
All a price ceiling would do is stifle the ordinary course of supply and demand and create a shortage.
2006-09-21 05:20:35 · answer #7 · answered by Huey from Ohio 4 · 1⤊ 0⤋
Price fixing has NEVER worked with anything. Many bad side effects.
2006-09-21 05:21:49 · answer #8 · answered by Anonymous · 0⤊ 0⤋
Because if you artifically place a price constraint on ONE item, then it will be victim to the changing market. For price control to work, it has to be applied to EVERYTHING in the economy and not just one thing.
2006-09-21 05:17:10 · answer #9 · answered by Anonymous · 1⤊ 2⤋
That is a tricky question
2016-08-23 07:16:52 · answer #10 · answered by Anonymous · 0⤊ 0⤋