In an effort to fight inflation of 18 percent per year in Venezuela, President Hugo Chávez has instituted price controls on most basic foodstuffs. Which of the following is the likely outcome of these price controls?

Question

Quizplus · Accepted Answer

Price controls may lead to artificial demand for basic goods, which could cause supply shortages as producers may choose to sell their goods in other countries or on the black market for higher prices. This has been seen in other countries where price controls were implemented. Therefore, it is likely that there will be shortages of basic foodstuffs in Venezuela.

In an Effort to Fight Inflation of 18 Percent Per