It doesn’t make sense to me. I used to be all like but then everything increases in price still Yada yada. But recently… why can’t we just lower the prices of petrol artificially. Why can’t we just lower housing prices by law?? Why can’t we erase inflation seeing as it’s completely made up anyway.
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> Why can’t we just lower housing prices by law?
**Okay, so let’s think this out, and remember, this is ELI5**
I’m going to pass a law that says, *”The price of a gallon of juice is too high. Nobody can sell it for more than $4 anymore. It’s a law!”*
Great! The law has now fixed the price of juice.
But the farmer spends money on fertilizer. He spends money on people to trim the orange grove. He has a whole orange grove and he pays property tax on that. He has to buy the plastic juice jugs. He has to buy bottling equipment.
What if it COSTS the farmer more than $4 per gallon just to MAKE the juice?
What would you do in that case?
Would you say “The price should stay at $4 a gallon, so the farmer will have to figure it out for himself”?
Well, that farmer is soon going to go broke, and close the farm. And the orange trees will die off. And then nobody gets juice. No juice for you!
**Bottom line:**
You really can’t futz with the prices of things artificially too much. At least not in a capitalist system. You can’t make people buy more or less of something, and you (generally) can’t make people charge more or less for a product.
If people don’t buy your juice at $6, you better lower it, if you want to sell any. And if that doesn’t cover your costs, you can’t continue to sell juice, can you?
If people are willing to buy your juice at $7, then maybe you can try for $8 and see if they’ll pay that too.
That’s capitalism. And that’s just how it works. You can’t really tweak it much without some other negative effects elsewhere.
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