Published on 25 Feb 2015
Price ceilings result in five major unintended consequences, and in this video we cover two of them. Using the supply and demand curve, we show how price ceilings lead to a shortage of goods and to low quality goods. Prices are signals that indicate to suppliers how much is being demanded, but when prices are kept artificially low with price ceilings, suppliers have no way of knowing how many goods they should produce and sell, leading to a shortage of goods. Quality also decreases under price controls. Do you ever wonder why the quality of customer service at Starbucks is generally better than at the DMV? The answer lies in incentives and price ceilings. We’ll discuss further in this video.
June 29, 2015
Price Ceilings: Shortages and Quality Reduction
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