Is this a price control referred to as a price ceiling or a price floor? A legal maximum price is a price ceiling. Would the regulation result in excess demand or excess supply of gasoline in the market? Binding price ceilings will always result in shortages of the product. The price ceiling in question will result in a shortage of gasoline of 0.625 thousand (i.e. 625) gallons of gasoline. How is the efficiency of the gasoline market affected by the price control? The price ceiling will reduce the efficiency of the gasoline market. Price ceilings lead to under investment in the product and other forms (non-price) rationing. There is a deadweight loss associated with the price ceiling of $625. See the diagram below.
Is this a price control referred to as a price ceiling or a price floor? A legal maximum price is a price ceiling. Would the regulation result in excess demand or excess supply of gasoline in the market? Binding price ceilings will always result in shortages of the product. The price ceiling in question will result in a shortage of gasoline of 0.625 thousand (i.e. 625) gallons of gasoline. How is the efficiency of the gasoline market affected by the price control? The price ceiling will reduce the efficiency of the gasoline market. Price ceilings lead to under investment in the product and other forms (non-price) rationing. There is a deadweight loss associated with the price ceiling of $625. See the diagram below.