This lesson is designed to help students explore the issues associated with gasoline prices. The notion that a price is "too high" implies that consumers are being somehow unfairly treated or abused by overzealous corporations. In a market system, producers must compete for consumer dollars, with price determined by the interaction of supply and demand. Under competitive circumstances, we do not consider a price to be too high or somehow unfair; we accept the actions of buyers and sellers as the most efficient method for allocating resources. In other words, if some people want to pay $75 for a ticket to Bruce Springsteen concert, that is their choice. If, however, the market is less than competitive and firms are not competing in a legal way for consumer dollars, we have a situation were prices may actually be "too high." The questions to be addressed in this lesson involve the forces driving the price of gasoline and whether or not the market is competitive. If the market is competitive then the high prices we are experiencing are appropriate given the current levels of supply and demand. If, on the other hand, the market for gasoline is not competitive and firms are artificially manipulating prices, then the current high price may require government action.
OPEC is generally seen as the primary institution that controls oil prices. Is that what OPEC really does? Use this lesson to get an overview of the history and function of this institution.
Students learn about price-gouging. Using a hypothetical post-disaster example, they will learn more about supply and demand, as well as the complexities associated with price increases in a supply-constrained market.
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This publication helps students analyze energy and environment issues from an economics perspective.
3 out of 10 lessons from this publication relate to this EconEdLink lesson.
This publication helps elementary students analyze energy and environment issues from an economics perspective.
2 out of 4 lessons from this publication relate to this EconEdLink lesson.