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To: Alberta's Child

You’re close, but wrong. High prices send a market signal and cure themselves through arbitrage or repairing the supply/demand shock.

Government regulations on gas blends limit the ability to shift gasoline, but price flexibility, desparaginly called “price gouging”, acts as a clarifier both for supply and demand.

Imagine the situation where a butcher has thousands of dollars worth of meat at meat at steak v. the person who wants to keep the television and refrigerator running. At $15/gal the market will clear only for those who need it most. If both of the above face the same pricing then their is a mismatch because the market clearing price is obviously higher. The people who need it least get too much and the people who need it most get to little. Supply remains the same because potential suppliers don’t gain anything by entering the market.

See this example from NC: http://www.econlib.org/library/Columns/y2007/Mungergouging.html

Price gouging laws are stupid and high prices cure themselves.


31 posted on 11/03/2012 6:01:55 PM PDT by 1010RD (First, Do No Harm)
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To: 1010RD
Don't misunderstand me ... I'm not in favor of "anti-gouging" laws. I'm just suggesting that allowing gas stations to charge any price they want for their fuel is not likely to address this current situation in New Jersey in the short term.

If I was allowed to charge $10 million per gallon for gasoline and you had a truck on the moon that needed 100 gallons of fuel to get home, I still couldn't be of any help because I have no way of getting this fuel to the moon even if you're willing to pay me a billion dollars for it.

81 posted on 11/04/2012 6:50:47 AM PST by Alberta's Child ("If you touch my junk, I'm gonna have you arrested.")
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