Bringing Supply and Demand Together


In 1973, the Organization of Petroleum Exporting Nations (OPEC) reduced the supply of oil



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Bringing demand and supply together

In 1973, the Organization of Petroleum Exporting Nations (OPEC) reduced the supply of oil.

  • In 1973, the Organization of Petroleum Exporting Nations (OPEC) reduced the supply of oil.
  • Because crude oil is a major input for gasoline, this reduction in the supply of oil caused a shift in the supply curve for gasoline leftward.
  • In an effort to prevent sharply rising prices, the government imposed price controls on gasoline in 1974.

People now wanted to buy more gasoline than was available at the controlled price. Thus a shortage was developed.

  • People now wanted to buy more gasoline than was available at the controlled price. Thus a shortage was developed.

When markets are altered for policy reasons, it is wise to remember that the actual results of actions are not always as intended, as seen in the cases of rent control and the minimum wage.

  • When markets are altered for policy reasons, it is wise to remember that the actual results of actions are not always as intended, as seen in the cases of rent control and the minimum wage.
  • We must always look for unintended consequences, the secondary effects of an action that may occur along with the intended effects.

The unintended effects may sometimes completely undermine the intended effects.

  • The unintended effects may sometimes completely undermine the intended effects.

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