Price ceiling problems, Chemistry

Price ceiling problems:

The persistent shortage created by price ceiling will in turn pose the following problems:

 Rationing

Government may have to apportion the quantity supplied of OQs among buyers who want to consume a greater amount of OQd. This may be done through the issue of coupons which must be surrendered together with cash, to obtain the good.

 Queuing

Whenever the good is available people will form long queues for it. The queues may be physical lines of people outside suppliers' shops typically in the case of essential commodities like drugs, bread, milk, etc. Or tall waiting lists in the case of consumer durables such as cars, television sets, government flats/houses, etc.

 Black (Parallel) Market

Black or parallel markets in which the good will be illegally sold and brought will spring up. In these illegal markets the price at which the good will be sold will even be higher than the equilibrium price.

 Selling at Sellers' Preference

Sellers may choose several ways to sell the god-first come, first-serve, selling to relatives and friends first, etc

 Random Allocation

This is selling by luck or chance. This may defeat the aim of setting the maximum price to ensure that the poor as well as the rich get the good. Selling may to all rich, or all poor.

Posted Date: 1/2/2013 6:51:57 AM | Location : United States







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