For those who don't know: Here's WHY price controls NEVER WORK.
The PRICE is determined by SUPPLY and DEMAND.
There are people willing to sell, and if the price goes UP they will make and sell more. If the price goes DOWN they will make and sell less.
There are people willing to buy, but if the price goes UP they will buy less, and if the price goes DOWN they will buy more.
Where the two curves meet is the MARKET PRICE. At that price, the amount sold equals the amount bought. Or rather, the optimal quantity is bought and sold.
IF YOU FORCE THE PRICE TO BE LOWER... then there WILL BE SHORTAGES. People will try to buy more, but the sellers won't be able to sell more.
IF YOU FORCE THE PRICE TO BE HIGHER... then there WILL BE SURPLUSES. Suppliers will overflow with stuff they want to sell, but buyers won't be buying.
YOU MUST LET THE PRICE SETTLE TO ITS NATURAL STATE. And the only way to get to the optimal price is to let buyers and sellers choose their own prices with NO controls.
We tried this with gasoline in the 70s. People lined up for miles to buy gas because the price was set low and so there were massive shortages. We also set the price of milk to be high in the past, which meant massive surpluses of milk, more than the people were willing to buy and drink. That's where "government cheese" comes from.
If you want more details, read about Adam Smith and the Invisible Hand. He noticed that price controls only cause problems, and allowing people to choose their own prices created an abundance of goods and an abundance of wealth.
For those who don't know: Here's WHY price controls NEVER WORK.
The PRICE is determined by SUPPLY and DEMAND.
There are people willing to sell, and if the price goes UP they will make and sell more. If the price goes DOWN they will make and sell less.
There are people willing to buy, but if the price goes UP they will buy less, and if the price goes DOWN they will buy more.
Where the two curves meet is the MARKET PRICE. At that price, the amount sold equals the amount bought. Or rather, the optimal quantity is bought and sold.
IF YOU FORCE THE PRICE TO BE LOWER... then there WILL BE SHORTAGES. People will try to buy more, but the sellers won't be able to sell more.
IF YOU FORCE THE PRICE TO BE HIGHER... then there WILL BE SURPLUSES. Suppliers will overflow with stuff they want to sell, but buyers won't be buying.
YOU MUST LET THE PRICE SETTLE TO ITS NATURAL STATE. And the only way to get to the optimal price is to let buyers and sellers choose their own prices with NO controls.
We tried this with gasoline in the 70s. People lined up for miles to buy gas because the price was set low and so there were massive shortages. We also set the price of milk to be high in the past, which meant massive surpluses of milk, more than the people were willing to buy and drink. That's where "government cheese" comes from.
If you want more details, read about Adam Smith and the Invisible Hand. He noticed that price controls only cause problems, and allowing people to choose their own prices created an abundance of goods and an abundance of wealth.