Explain the various ways in which a price ceiling on gasoline that is set below the equilibrium price would make buyers and sellers of gasoline better off or worse off. What would happen to total surplus and deadweight loss in this market?
As gasoline prices rise, many people are calling for price caps, but price caps generate a distorted reflection of reality, which leads buyers and suppliers to act in ways inconsistent with the price cap. By masking reality, price caps only make matters worse.
Suppose that a price ceiling is set below the equilibrium price of gasoline.