The Disadvantage of Price Control

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Markets are usually a good way to organize economic activity. So economists often disagree with the price ceiling and price flooring to control the market. The price is not the random outcome. The price is decided by the “invisible hand” that is made of every consumers and suppliers.

If the government intervenes the markets, they will break the market’s balance. Price control is propose of helping poor people. But Venezuelan government makes the bigger trouble. Government wants to control the inflation and they set the price very low. The commodity like brush, tower, tissue, shampoo and so on are quite cheap to help poor people. However, the price is so low that company and producer cannot get the revenue in the markets. So, farmers plant less grains. Companies cut down the production. The suppliers even store the good deliberately and cause the shortage so they can increase the revenue.

Price control decrease the revenue of people who it meant to help. Government actually can use different way to help those in need other than price controlling. Such as subsides and so on.

1 Comment »

  1. yingz Said,

    October 14, 2016 @ 4:23 am

    Price control is not always bad. It can protect the consumers and certain industries. Some consumers cannot afford certain goods without the price control and some industries may be broken soon. The aim of the price control is good. Also, it is widely used in politics because the politicians want more people to support them. The price control is not always on the native industries. It can be posted on the foreign goods. Then it can reduce the foreign goods and protect the native industries. Therefore, price control will cause economy inefficiency, but it is the most efficient to protect the consumers and industries.

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