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The Well-Grounded Yuppie

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Tuesday, September 30, 2008

Gas Shortage In The Carolinas

Even though gas is plentiful in Greensboro, I hear there's a real shortage in other areas of North Carolina and lots of gas stations ran out of gas.

How does a company "run out" of a popular product in today's economy?

If the supply overwhelms the demand, shouldn't the price of the product increase until it reaches a price equilibrium? If a gas station only has 25% of "normal amounts" of gas available , shouldn't the station owner increase the price to $10/gallon? As an inelastic good, people will still buy the $10 gas, they'll just buy 25% as much, probably just enough to do their necessities.

In a free economy, goods shouldn't ever be "sold out" for long, the amount left should instead get lower and lower into an asymptote, as the price increases until people can no longer afford it...


Blogger Andrew said...

Yo Paul, what up!

I think the reason they ran out of gas instead of skyrocketing the price is because the demand principal is slower to react than that. If they just shot up the price, they would probably get in trouble for price gouging. I suppose they could raise it 10-15 cents a day but after a day or two of that, they'd be outta gas.

Just my guess though, I ain't no MBA or anything.

10/14/2008 11:19 AM  
Blogger Paul Zhao said...

Wait, they got individual price gouging laws in free economics? I also don't know business laws much, but I thought you just couldn't have every gas station get together and decide on a price, but as an individual, you can set your price anything you like?

10/14/2008 12:53 PM  
Blogger Andrew said...

FYI, gas shortage is over... time for a new post :D

4/03/2009 2:37 PM  

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