Do you think price controls should never be used or are there cases where it is...

Do you think price controls should never be used or are there cases where it is a good idea?

Expert Solution

Answer:

Most prices re controlled. This is normal and universally expected. Price controls can take the form of maximum and minimum prices.

A better solution to maximum prices may be to increase the spply of housing,
A better solution to minimum prices is may be to offer subsidies to farmers who promote some environmental benefit to society rather than through prices.

So price controls are best for situations where the consumers are people we want to redistribute to and the producers people we want to redistribute away from, where supply is relatively inelastic.

Rent control seems the ultimate example of this,where in the short term and even medium term the supply is pretty fixed, and lanlords tend to be a lot richer than their tenants. The minimum wage is pretty similar in most business..

Generally, price controls distort the working of the market and leads to oversupply or shortage. It might complex the problem instead of solving them. Neverthless, there maybeoccasions when price controls can help.

Foe eg., with high volatile agricultural prices.

Rahul Sunny answered 2 years ago

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