Will this shortage of gasoline disappear and market reach an equilibrium if this had been an unregulated market? Justify.

FIGURE 2 Panel (a) shows the gasoline market when the price ceiling is not binding because the equilib rium price, P, is below the ceiling. Panel (b) shows the gasoline market after an increase in The Market for Gasoline the price of crude oil (an input into making gasoline) shifts the supply curve to the left from with a Price Ceiling S, to S2. In an unregulated market, the price would have risen from P, to P2. The price ceiling, however, prevents this from happening. At the binding price ceiling, consumers are willing to buy Q but producers of gasoline are willing to sell only Q . The difference between quantity demanded and quantity supplied, Q - Qs measures the gasoline shortage. (a) The Price Ceiling on Gasoline Is Not Binding (b) The Price Ceiling on Gasoline Is Binding Price of Price of Sz Gasoline Gasoline 2. . . . but when supply falls ... Supply, S, 1. Initially, the price ceiling is not Price ceiling Price ceiling binding . . . 3. .. . the price P, ceiling becomes 4. . . . resulting binding . .. ha Demand shortage. Demand 0 Quantity of 0 Os Quantity of Gasoline Gasoline