The control of Prices

Equilibrium price leads to:

the absence of shortages and surpluses

Minimum prices (5)

 justification

 effects

 cost to the government

 dealing with resulting surpluses

 example of minimum unit pricing of alcohol

Minimum prices

example of minimum unit pricing of alcohol

minimum unit pricing versus higher taxes

Maximum prices (4)

 justification, effects

 dealing with resulting shortages

 ‘underground’ or ‘shadow’ markets

 the case of price gouging in times of natural or health emergencies

Maximum prices

 dealing with resulting shortages (6)

first-come, first-served (most common for low stakes)

random ballot

favored customers

by merit

rule or regulation

rationing (one of the most common)

The impact of price controls after a crisis (2)

.The impact of a crisis in a free market

.Supply falls and demand rises thanks to panic buying/hoarding

.The impact of a cap on price increases

.A shortage of Q_d – Q_s