Price controls

Question

Price controls

Quizplus · Accepted Answer

While price controls may be implemented with the intention of promoting fairness or efficiency in markets, they can often generate their own inequities. For example, price ceilings that are set below the market-clearing price can lead to shortages and rationing, often to the disadvantage of low-income consumers. Similarly, price floors set above the equilibrium price can lead to surpluses and a misallocation of resources. Therefore, while price controls may have potential benefits, they must be carefully designed and implemented to avoid unintended consequences.

Price Controls