1. The state of California is concerned about the recent drastic increase in the price of gas across the state and the effect it may have on the populaces’ ability to commute back and forth to work. California is considering two policies to improve consumer outcomes in the current gas market. Currently in California, the average gallon of gas costs $6.44 and 48 million gallons of gas are purchased each day. Please address one of the following questions in up to 250 words. Make sure to clearly label which question you are answering and to only answer one question.

A- The governor of California, Gavin Newsom, is considering implementing a price ceiling on gasoline sold in the state. At the proposed price ceiling of $6.12 per gallon, Newsom expects the consumption of gasoline to drop to 45 million gallons of gas per day. Is this price ceiling binding? Will consumers be made better off at this price ceiling level? Is the market as a whole better off with this price ceiling? How do you know? Does the government benefit economically from this policy? (Hint: Draw a graph of the market)