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Chapter 4: Problem 1

Why do some consumers tend to favor price controls while others tend to oppose them?

Short Answer

Expert verified
Some consumers favor price controls because they can lead to lower and more stable prices, particularly for essential goods and services. Others oppose them due to potential market inefficiencies such as increased demand and decreased supply, leading to potential shortages. The balance between these views depends on individual situations and perspectives on the role of government in market economies.

Step by step solution

01

Understanding Price Controls and Consumer Perspectives

Firstly, identify what price controls are: they are government-imposed limits or restrictions on the price charged for certain goods. Consumers tend to have different views on these controls due to their impacts on prices, availability of goods, and overall economic conditions.
02

Explaining Favor for Price Controls

Some consumers favor price controls because they can lead to lower prices for essential goods and services, helping them to afford what they need. Price controls can also prevent price hikes during times of crisis or shortages, providing a level of financial stability.
03

Explaining Opposition to Price Controls

On the other hand, some consumers oppose price controls because these controls can lead to inefficiencies in the market. An artificially low price can result in increased demand and decreased supply, creating shortages. Therefore, these consumers prefer prices to be determined by the market.
04

Concluding the Two Views

In conclusion, whether price controls are perceived as beneficial or harmful depends on a consumer's perspective on short versus long-term impacts, their economic situation, and their beliefs about market efficiency vs. government intervention.

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Most popular questions from this chapter

An article in the Wall Street Journal noted that a study by the U.S. Congressional Budget Office "estimated raising the minimum wage to \(\$ 10.10\) an hour would reduce U.S. employment by 500,000 but lift 900,000 Americans out of poverty." Why might raising the minimum wage reduce employment? How would it raise some people out of poverty? What effect might these estimates have on a normative analysis of the minimum wage?

Do producers tend to favor price floors or price ceilings? Briefly explain.

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The merry-go-round in Ross Park, a public park in Binghamton, New York, was first installed in 1920 and has been periodically refurbished by the city in the years since. There is no entry fee to visit the park or to ride the merry- go-round. Is the merry-go-round a public good? Briefly explain.
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