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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.
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