Question
California just announced that it will soon ban the sale of new gasoline-powered vehicles. In other words, California is imposing that the quantity of new
California just announced that it will soon ban the sale of new gasoline-powered vehicles. In other words, California is imposing that the quantity of new gasoline-powered vehicles bought and sold in California will be zero. (a) Discuss how we would use information on the supply and demand curves for new gasoline vehicles in California to calculate the total dollar value of harm that such a ban will have on consumers and producers.(b) Would we expect that the dollar harm from this ban would be larger when looking at the short-run supply and demand curves or when looking at the long-run supply and demand curves? Explain your reasoning. (Assume that prior to the implementation of this policy, the equilibrium price and quantity in the short-run are the same as the equilibrium price and quantity in the long-run).
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