2. The state legislature mandates a price floor for gasoline of PF per gallon. Assess the following...

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2. The state legislature mandates a price floor for gasoline of PF per gallon. Assess the following statements and illustrate your answer using the figure provided.

Price of gas Quantity of gas E

D S

A B Price floor QF QE PF PE

a. Proponents of the law claim it will increase the income of gas station owners. Opponents claim it will hurt gas station owners because they will lose customers.

b. Proponents claim consumers will be better off because gas stations will provide better service.

Opponents claim consumers will be generally worse off because they prefer to buy gas at cheaper prices.

c. Proponents claim that they are helping gas station owners without hurting anyone else. Opponents claim that consumers are hurt and will end up doing things like buying gas in a nearby state or on the black market.

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