The Dark Side Of Price Controls Essay

1716 WordsDec 7, 20167 Pages
The shortage On the thirteenth of May of 2015, Capx, an online British news website, published Rachel Cunliffe’s article, “The dark side of price controls in Venezuela,” where she goes in depth about the effects of a binding price ceiling has on the living conditions of Venezuelans. According to Mankiw, a price ceiling can be defined as a legal maximum on the price at which a good can be sold that is below the equilibrium price. A price ceiling with a binding constraint, or binding price ceiling, occurs when the government sets a required price on a good or goods at a price below equilibrium. In “The dark side of price controls in Venezuela,” the socialist state of Venezuela, is experiencing shortages of basic goods, such as toilet paper, milk, coffee, soap, and electronics, which have led people to queue up in long lines to get them on a first come, first served basis. These shortages have also caused a sharp increase in crime which range from police officers being gunned down for their weapons, trucks ambushed for their merchandise, and commuters being held up for their cell phones. The root cause of all the problems that the citizens of Venezuela face are due to government price fixing and currency control. In the free market, prices function as signals to both consumers and producers of how much of a product or service must be demanded or supplied respectively. A binding price ceiling occurs when the government sets a required price on a good or goods at a price
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