Price controls sometimes affect market equilibrium and sometimes they do not. Na

Question

Price controls sometimes affect market equilibrium and sometimes they do not. Name one type of price control where you believe market equilibrium is not affected, and describe how it affects the wealth-building process, bringing in references to the text or outside research as support. Think of another type of price control that you believe does affect market equilibrium, and describe the consequences to the wealth-building process, bringing in references to the text or outside research as support.

Explanation / Answer

Price control refers to goverment ffixing minimum and maximum price ceiling on certain goods.Howevrr the price control mechanism works only in short term durations ,in long term too much price control may lead to shortage , rationing , black market and hoarding.Type of price control can be price cieling or flooring . Price ceiling below market price leads to shortage and consumers then compete against eachother.Minimum wage is a type of price control when government sets a minimum wage level for workers , the income may increase but for low paying jobs demand will be inversely related to prices and employers will lay off workers creating unemployment. However unions may get benefitted so employers compensate by paying more when there is wage subsidy but may increase cost of labor.

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