Principles of Microeconomics, 7th Edition

Published by South-Western College
ISBN 10: 128516590X
ISBN 13: 978-1-28516-590-5

Chapter 6 - Part II - Supply, Demand, and Government Policies - Questions for Review: 4

Answer

In general, economists oppose price controls because they believe that these controls work against numerous forces in the economy that have determined the equilibrium price level desired by both consumers and producers.

Work Step by Step

Economists believe that prices are the result of millions of business and consumer decisions that lie behind the supply and demand curves. Prices balance supply and demand and, as a result, coordinate economic activity. However, when the government sets prices, it obscures these decisions that normally guide how the economy allocates resources. In general, some people claim that the government sets prices in order to help members of society (such as those who need a sustainable minimum wage), but these efforts often hurt those who the government aims to help.
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