HOW GASOLINE IS A MARKET FAILURE

How Gasoline is a Market Failure

How gasoline is a market failure

Introduction

In July 2008, when he wrote this work, the price of gasoline in the United States were about 37 percent higher than in January of that year. Gasoline prices have always fluctuated, and this increase may well be explained by an increase in crude oil prices. It is striking that, at this time, rising gasoline prices were not accompanied by any strident calls for restoration of legal restrictions on the maximum price of gasoline. It is unclear what the reason is: to increase economic literacy of citizens, realize that the price control in creating the deficit, or with memories of the consequences of this control during the oil crisis in the late 1970's.

However, regardless of the explanation, Americans seem more comfortable with a situation in which the distribution of gasoline by using the free operation of the price mechanism. Such an attitude does not extend to all goods and not in any circumstances. In particular, after the various disasters and emergencies, Americans tend to treat with great suspicion in higher prices for certain goods. Rising prices of such people are often referred to as "price inflation" or "profiteering on the mountain", it almost always becomes a target of moral condemnation, and very often - the subject of a legislative ban (Durbin, 2008).

Discussion

Of course, to what extent these considerations allow us, in all the circumstances, support the use of prices and their freedom from regulation, will depend on the amount to which real markets resemble the theoretical models of economists. And, regardless of how these models resemble, in our opinion, the reality is, under normal circumstances, in cases of inflation in prices, we are talking about situations in which they clearly do not work. On such situations, they say, as a rule, as the failure of the market. Sometimes the term is broadly applied to any situation in which markets do not serve to achieve a certain goal, which we consider desirable - whether it's defense, happiness or genuine art. If you give a more precise definition, a more appropriate standard economic use of the term, the market failure - a situation in which markets do not yield effective results. In turn, under effective can be understood as an outcome in which the entire set of manufactured goods could not be produced at lower ...