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A price ceiling does not reduce a shortage, in fact it is likely to cause such a situation. A price ceiling is intended to relieve some of the high costs that a shortage can cause, but it is a treatment of the symptom rather than the cause.

To relieve a shortage, the government is better off offering incentives to produce more of the said good/service. But wether it is effective in the short term or not depends on the time needed to increase production. For instance, if sugar is the product in short supply, removing barriers to import or offering tax breaks to increase production of sugar would result in increased supply in a year or less, but offering tax breaks on low income housing in Manhattan may require years to have much impact (or might be effective in very short order, depending on how it was done).
But if you are really looking for how to alleviate the high prices associated with a short term shortage, like certain fuels that have to meet certain local requirements spike in price when not enough production is in place, well, that is a tougher question. Any attempts to reduce the price are likely to only increase the shortage, creating a black market. So again, the best thing to do is to offer incentives to produce, which will reduce the shortage and the high prices (by giving the producers the same amount of profit, but in part through the tax breaks or other incentive).

2007-10-09 02:21:55 · answer #1 · answered by Anonymous · 0 0

Rationing is the most common response of governments when there is a shortage of necessities. It was widely used by governments during WWII for food, gas etc.
Governments have stored goods for bad times for example the Pharaoh stored grain in Egypt and our strategic oil reserve.
Government often ask for aid shipments from foreign countries after disasters and crop failures

2007-10-08 23:31:52 · answer #2 · answered by meg 7 · 0 0

if this product is basic goods, no price manipulation will control its supply. so if you are saying there is shortage of food, what can government do to help this situation, well call on your friends for support.

2007-10-09 03:38:33 · answer #3 · answered by Anonymous · 0 0

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