Which of the following will tend to occur if price controls are imposed on a product?
A)persistent shortages
B)illegal markets
C)illicit channels of distribution
D)industry investment slows or stops
E)All of the above are correct.

Question

Which of the following will tend to occur if price controls are imposed on a product?
A)persistent shortages 
B)illegal markets 
C)illicit channels of distribution 
D)industry investment slows or stops 
E)All of the above are correct.

Quizplus · Accepted Answer

Price controls create a situation where the demand for a product exceeds its supply, which leads to persistent shortages. When the demand for a product is high, but the supply is low, illegal markets emerge to meet the unmet demand. These illegal markets often lead to illicit channels of distribution, thereby creating a black market for the product. Moreover, because price controls reduce the profit margins of the producers, investors are less likely to invest in the industry, which may lead to industry investment slowing or stopping altogether. Therefore, all of the above are correct if price controls are imposed on a product.

Which of the Following Will Tend to Occur If Price