ECON 102 Lecture Notes - Lecture 12: Price Controls, Price Gouging, Natural Disaster

• School: University of Illinois
• Department: Economics
• Course: ECON 102
• Professor: Isaac Di Ianni

Document Summary

Economic theory of maximum price controls on oil: price controls on domestically produced crude oil. Oil produced in us subject to price controls. Thought process: keeping price of oil low stimulate economy. Shortage of domestically produced oil but no shortage in world market. Americans can import from abroad: max price controls made american oil companies, while american oil was capped, opec raised prices uncompetitive from opec. Problem: people move from one state to another and when they move, one state has more ppl than others but allocation is still same so, shortages in some states but surpluses in other states. Ex. jets would get fuel but not tractors: synthetic fuels corporation. Energy crisis of 1970s wasn"t an energy crisis; it was the predictable result of price control laws (more of a gov crisis) Opec raised prices bc americans suddenly had to buy oil and had no other choice, so opec wasn"t the problem.