Blog entry #2

Why do price ceilings cause shortages?  What is a black market and why might it alleviate shortages?

Price ceilings cause shortages because when the price is low, people will buy more. If gas is $2.00 more people will want to buy it and buy as much as they can. The black market are illegal market that are not controlled by the government. Black markets can alleviate shortages because if people can not get their product on the regular market, they can sometimes buy their products on the black market for a higher price.

Blog Post 1

When price controls are not in place, gasoline companies use the interactions between the consumer and the producer to answer the fundamental economic questions. There is a high demand for gas but if the gas companies set the price for gas at such an expensive rate, people will look for other alternative ways for fuel. To answer the how to produce question, gas companies need to develop new technologies to efficiently make gas so that they have a higher profit. For whom they produce is to the people that are willing to pay for gas and that have cars.