So I try to stay on top on economic news, and one thing that is confusing me is why government enforced price caps on products wouldn’t work? All I hear is about how strong the economy still is, record profits for corporations, and increasing wealth of the country’s most affluent people. Wouldn’t price caps cause: 1) more wealth for the average consumer 2) still profitable corporations (albeit not the record profits that they continue to reach) 3) more equitable wealth distribution?
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Price caps cause shortages.
E.g. let’s say you capped the price of gasoline at $4 per gallon.
But, for other reasons that the government may or may not have control over, the actual cost to produce a gallon of gasoline exceeds $4.
What do you think happens?
The ignorant people who advocated for the price cap, have this idea that they’ll just sell gasoline at $4 per gallon and take a loss.
What really happens is gasoline stops being produced.
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