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. Price is the natural equilibrium point where the demand for a good or service is equal to the supply of said good or service. Artificially lowering the price means that demand now exceeds supply, which means that not everyone who wants to purchase a good or service will be able to. The average person may have more wealth in the abstract, but that is somewhat meaningless if they are unable to use that wealth to buy anything.
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