Stabilize the price of gasoline by fund

Reference no: EM1375638

To prevent gasoline values from having devastating effects on economy it has been proposed that all gasoline values in U.S. be fixed at the average value for the past 2-years. For simplicity it will be assumed that this price is $2.50 per gallon. When equilibrium prices are under $2.50 per gallon the excess payments will be kept in a government fund. When retail prices exceed $2.50 per gallon money from this fund will be distributed to pay the difference. Do you think that this plan would help the economy? What effect would the plan have on the supply and demand curves? Would gas stations and oil companies be able to stay in business?

Reference no: EM1375638

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