Advantage and disadvantages of price ceiling PDF

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Group assignment for microeconomic course for those who needs...

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What would happen when the government imposed the price ceiling on the essential items for a certain long-term period of time?

In my opinion,there will be advantages and disadvantages after certain long time. The big pro of a price ceiling is, of course, the limit on costs for the consumer. It keeps things affordable and prevents price-gouging or producers/suppliers from taking unfair advantage of them. If it's just a temporary shortage that's causing rampant inflation, ceilings can mitigate the pain of higher prices until supply returns to normal levels again. Price ceilings can also stimulate demand and encourage spending.

So, in the short term, price ceilings have their advantages.But,if it continue for too long or when they are set too far below the market equilibrium price like when the quantity demanded equals the quantity supplied,there will be disadvantages.

Such as demand can be skyrocket that leading to shortages in supply. Also, if the prices producers are allowed to charge are too out of line with their production costs and business expenses, something will have to give. They may have to cut corners, reducing quality, or charge higher prices on other products. They also might have to discontinue offerings or not produce as much that causing more shortages. Some may be driven out of business if they can't realize a reasonable profit on their goods and services.

Briefly talk,there are pros and cons about the price ceiling that will affect the market condition which is keeps the price affordable,prevent price-gouging and stimulates the demand as the pros.For the cons,it will causes supply shortages often,may induce loss of quality,corner-cutting and also may lead to extra charges or boosted prices on other goods....