Conclusion on why is price ceiling not the best solution?

Question

Plz help me!

Answer 1

Because the market will come to a natural equilibrium if left without any sort of regulation. And this equilibrium will be the most efficient state for the market.

Answer 2

Some economists believe that free market is the best way for economy. An efficient market will determine the optimal price for a product a given point in time based on supplies and demands.

Price ceiling would imply "price fixing" and thus does not create the best value for generally the supplier. And if the supplier aren't getting their best price, they can't afford to pay their workers as well, thus workers can't go out to spend as much money on other goods. And because not as much other goods are being consumed, other suppliers would have to adjust their prices as well. The snowball effect of this could start having larger scale negative impact on the whole economy.

Answer 3

A price ceiling that is binding must be set below the equilibrium market price. Below equilibrium, quantity demanded exceeds quantity supplied and a shortage exists. This, in turn, often leads to black market activity (not cartel activity which is a problem in oligopoly). The black market price will be higher than the equilibrium price that would have existed in the absence of the price ceiling.

Answer 4

Simply because in nearly all price ceiling experiments results in cartel behaviour which in turn ensures that the public is screwed. Cartel behaviour means supply groups work together and fix the price of supply. and no matter what happens price can only go up irrelevent of the true commodity price.

Answer 5

Price ceilings are artificial restraints on trade and violate the basic rules of economics - supply and demand.