Price Controls

Walter E. Block and Ivan Jankovic
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Walter E. Block: Loyola University New Orleans
Ivan Jankovic: University of Mary

Chapter 11 in Action and Choice, 2022, pp 169-192 from Springer

Abstract: Abstract We have seen in Chap. 7 what happens if the actual market price departs from the market clearing price that equalizes supply and demand. Temporary shortages and surpluses result, leading to the self-correction of the market. In the case of a temporary shortage, the price will start inching up, reducing the spread between (higher) quantity demanded and (lower) quantity supplied, eliminating the low-preference buyers and convincing the higher cost sellers to enter the market, until finally the two quantities equalize and price settles at the equilibrium level (Fig. 11.1). With a surplus, the opposite happens, the price starts dropping, eliminating the high cost sellers and allowing the lower preference buyers to enter the market. This reduces the spread between lower quantity demanded and higher quantity supplied until the equilibrium point is reached (Fig. 11.2).

Date: 2022
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DOI: 10.1007/978-981-19-3751-4_11

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