Rising fuel prices is an all too common occurrence in Jamaica. Yesterday it was announced that

motorists should pay more for gasoline at the pumps, as 87- and 90-octane gasoline will be sold

for $125.00 and $130.00 per litre, respectively, up by $8.00 each. The sudden rise in gas price

has resulted in several riots in the past. The last riot was in April 1999, when demonstrators took

to the streets to protest a hike in the fuel tax.

1.

The president of the Jamaica Gasoline Retailers Association (JGRA) calls for the government

to put a cap on the gas prices. Explain the implication price ceiling on gasoline below the

equilibrium price.