Why do they matter?
Who should decide the price of something?
Governments sometimes set laws and regulations that establish prices, but it doesn’t generally pay off for consumers.
Price ceilings: Limits on how much a business is allowed to charge for goods or services
Price ceilings give bad incentives to consumers and businesses.
Rent control laws:
- Restrict how much landlords can increase rent in a given year
Price gouging laws:
- Prohibit businesses from unfairly increasing prices when buyers are vulnerable.
- Businesses have less reason to meet demand while consumers have little reason to conserve.
- There are fewer incentives to deliver high-quality products when prices can’t change.
Competition is a more effective (and less controlling) way to keep prices low and support prosperity for all.
- How could wealth redistribution discourage innovation?
- What kinds of government policies can prevent exploitation?
- What is “rent-seeking”, in your own words?