University of Central Florida Price Control Discussion

Think of this assignment as a debate. Your reading on the topic of price controls should allow you to have some insights on certain situations that could emerge under stressful conditions. Imagine that a natural disaster struck a certain area of the country or a pandemic. Immediately basic goods such as water, toilet paper, gasoline, food, and others became “scarce.” These goods are only available for sale at exorbitant prices. The local government, in an effort to protect its citizens, has determined that these basic goods will be subject to strict price controls and anybody attempting to sell these goods at above stipulated prices will be jailed for a minimum of 10 years. It seems unfair for some to gain at the expense of others.

This discussion will be minimum 350 words .

Debate your position regarding these issues.

(1) Why should or shouldn’t a government implement a price control in this type of situation?

(2) Should in midst of disaster a seller be allowed to sell without price ceiling? Why or why not (based on economics theories we learn in the class)?

(3) Who gains and who loses when exchanges outside of the price control system take place?

(4) Would you be entrepreneurial and take a risk despite the penalties associated? If you would, under which economic conditions? If you would not, under which economic conditions

(5) Does a price control in this type of situation lead to an efficient use of the basic resources? Or does it lead to a difference goal? Why or why not? Which economic goals should be the goal of that affected area? Why?

You are more than welcome to add many other aspects, data, facts, and analysis to the discussion.

REMEMBER: This is not a business ethic class or a law class or a religious study group or a personal story time. Use economics theories when you debate each point and argue your case.

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These two easies you need to response to with minimum 250 words :

1- 1. I believe the government shouldn’t implement price controls because when a government imposes price controls, the eventual consequence can be the creation of excess demand in the case of price ceilings, or excess supply in the case of price floors.

2. I think that in the midst of a disaster a seller shouldn’t be able to sell without a price ceiling because if they know that people need a certain product like a flashlight for an example, if there is a hurricane sellers shouldn’t be able to raise that item from around $20 to $40.

3. Sellers would gain more because they would just benefit from there raised prices, and buyers would lose more money because they would have to buy the things they need.

4. I wouldn’t take the risk jail time for any amount of money, with the demand is increasing and supply decreasing it wouldn’t be smart to take that risk when I’ve worked hard for and losing all my money. I wouldn’t do it under the conditions we are in now with COVID-19 and also during natural disasters because of the rising prices.

5. Under these conditions price control leads to an efficient use of basic resources considering that everyone takes what they need rather than everything they want. And when everything goes back to normal price control goes back to normal and prevents sellers from price gouging.

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Second: (1) Why should or shouldn’t a government implement a price control in this type of situation?

The move by the government to implement price control in the situation is necessary. Price control would see to it that essential goods are available for all buyers irrespective of financial standing (Cavallo, Cavallo & Rigobon, 2015). The government can pass a binding floor price on life-essential products. They include medicines, water, among others, since some sellers and producers may take advantage of such a situation to stretch their profit margins.

(2) Should in midst of disaster a seller be allowed to sell without price ceiling?

Sellers in any market seek to maximize their profit margins and therefore sell products to the highest bidder. The same stands even amid a crisis. They gouge and take advantage of buyers to the possible extent. Market prices rise after a disaster, and it is necessary to allocate scarce resources, doing away with shortages, and pooling the supplies required to such an area. Market-based prices may influence the market positively, and a seller should be allowed to sell without a price ceiling. It will attract more suppliers and create a wider variety of goods for a consumer.

(3) Who gains and who loses when exchanges outside of the price control system take place?

Maximum prices negatively affect consumers (Murphy, Pierru & Smeers, 2019). It is because setting up of price ceilings results in lower supplies and potential shortages. Therefore, consumers may result in illegal activities to try to acquire the needed goods. Setting up minimum prices results in over-supply of goods, and many may go perishable, negatively affecting the suppliers. Price controls generally deform the standard nature of markets, leading to oversupply or shortage, affecting both consumers and suppliers.

(4) Would you be entrepreneurial and take a risk?

I would not take a risk in either economic conditions. It is because the penalty of risk may be too vast, resulting in bankruptcy or breaking of the law. The two would affect my business reputation and may result in the collapse of a business enterprise.

(5) Does price control in this type of situation lead to an efficient use of the basic resources or does it lead to a difference goal?

Price control in such a situation leads to different goals. Intervention by the government will disadvantage the producers and suppliers, and they may decide not to meet the market demand as they would make losses. The ripple effect would result in consumers lacking enough goods to meet demand. The economic goal should be letting market prices prevail, an impact that would catapult the increased number of investors in anticipation of increased profits. Soon, the supply would equal demand, and the market would re-stabilize itself.