He seems to assume that the oil companies can raise

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Unformatted text preview: st week. This is getting ridiculous. It used to be that I paid about $25 to fill up and now I’m paying almost $10 more. For many people, this G 152 Unit II The Basics ’m not sure I agree with Gilberto’s assumption. He seems to assume that the oil companies can raise the price of gas to anything they want. But if they could do that, why weren’t they charging more when the price of gas at the pump was under $2 a gallon? They didn’t, I expect, because they couldn’t. Supply and demand determine gasoline prices—not the big oil companies. Supply and demand are impersonal forces, they don’t have an office anywhere in some building. But people always seem to want to blame someone for their predicament. It is just so easy to blame the oil companies. Well, suppose, the federal government does slam a price ceiling on gas when it is I 06 (128-153) EMC Chap 06 11/21/05 3:15 PM Page 153 rising rapidly. If that price ceiling is below the equilibrium price, then simple economics tells us that we are going to have some problems. At a price below equilibrium price, shortages will arise. And with shortages, long lines. I can remember back to the late 1970s when the federal government did place a price ceiling on gas at the pump. Sometimes I had to wait for an hour in line to get gas. I don’t want to go back to that. Patrick Chu, graduate student in physics aybe sometimes a long line is better than a high price. Take what happened after Hurricane Katrina or after any natural disaster. All of a sudden, the price of water rises. What the day before cost $2 to buy, now costs $5 or more to buy. After Katrina hit, many people had to leave their homes. Some went to Houston, Baton Rouge, Atlanta, and other cities. In many of the cities near where cities were devastated, hotel and motel rooms went for higher daily rates. Some of these motel and hotel owners must have said to themselves, “Well, here come all the people leaving New Orleans, so our motel rooms are going to be in high demand, so now is the time to raise the daily rate.” It see...
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