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What Are the Advantages and Disadvantages of Price Controls?
Governments utilize price controls to improve worker welfare, mitigate inflation, and build balance in the market. Price controls help people afford goods and services. The government imposes price controls to regulate prices rather than allowing market forces to decide price levels.
Common price controls include price ceilings and price floors.
A price ceiling is used to limit price increases. When a price ceiling is less than the equilibrium price, the quantity demanded increases beyond the amount of goods supplied. This situation leads to excess demand and shortage in the market.
On the other hand, price floors aid in preventing a price from dwindling below a certain point. If the price floor is greater than the equilibrium price, the quantity supplied will be higher than the quantity demanded. As a result, there will be product surpluses or oversupplies. Consumers will not buy some goods due to higher prices.
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What Is the Implication of Raising the Minimum Wage?
If the government increases the minimum wage, many employers will recruit fewer people. Higher salaries will reduce the demand for labor, resulting in labor surplus conditions and increased unemployment.
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