If the government implements a price ceiling on the prices of gasoline, the government will be indulged in legally setting an upper cap or a limit on the price at which gasoline can be sold to the consumers. The government should not get involved in the natural process of…
If price ceiling on gasoline prices are implemented economic efficiency will be lost. Economic efficiency takes place when a particular action results in higher benefits for the society and lower costs. If price ceilings are set and the suppliers decrease the supply, the gasoline will start trading in black and unregulated markets where the suppliers will be charging higher price from the consumers and the taxes and revenue that is earned by the sale and purchase of gasoline by the government will be lost.
Other than black markets, the entire economic system may be negatively impacted by price ceiling on gasoline prices. This is because when there will be shortage of gas, people will have to line up in huge queues in the pursuit of obtaining gas. As a result of this a lot of time will be wasted which the consumers could have invested in positive economic activity and this would result in decline in ...
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