Price controls can lead to shortages or surpluses from "summary" of Basic Economics by Thomas Sowell
Price controls are a common tool used by governments to try to influence markets. These controls are usually aimed at controlling the prices of basic necessities like food and fuel. However, while the intention behind price controls may seem noble, the consequences can often be quite detrimental.
When the government sets a price ceiling below the market equilibrium price, it can lead to shortages. This is because at the lower price, there is an increase in the quantity demanded but a decrease in the quantity supplied. Suppliers are reluctant to produce more at the lower price, leading to a situation where there is excess demand and not enough supply to meet it. This can result in long lines, rationing, or even black markets as people try to obtain the scarce goods.
Conversely, if th...
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