If the government imposes price controls and prevents prices from adjusting naturally to supply and demand,

Question

If the government imposes price controls and prevents prices from adjusting naturally to supply and demand,​

Quizplus · Accepted Answer

Price controls prevent market forces from balancing supply and demand, leading to a mismatch between the quantity demanded and supplied. This results in inefficient allocation of resources, as some consumers may not be able to purchase what they need, while producers may not be able to sell all they produce. Price controls also lead to shortages and surpluses in the market. Hence, option B is correct. Option A is incorrect because price controls distort the equilibrium in the market, thus making it difficult to equate the quantity demanded with the quantity supplied. Option C and D are incorrect because price controls do not necessarily improve equality or efficiency.

If the Government Imposes Price Controls and Prevents Prices from Adjusting