Attention!!!! who know this answer??? i need your help urgently!!!?

Question

b. Many economists argue that the government shouldn't enforce price floors and price ceilings because then supply and demand aren't set at the equilibrium price and it results in deadweight loss to society. However, isn't it true that sometimes the morally right thing to do is for the government to employ price floors/ceilings? Give some examples of countries in which the government has imposed price floors or price ceilings and explain the consequences of these government measures.

Answer 1

As the saying goes, the road to h**l is paved with good intentions.  Although the government may feel they are doing the right thing, there simply is no way to get around the fundamental principles that will result in their actions actually making a situation worse for those they are trying to help.

Say the cost of rice is going up dramatically and the people are rioting in the street that they want cheaper rice.  So the government sets a price ceiling on rice.  Just for our example we will also say that the government tells farmers that they cannot export their rice either.  At the artifically low price the demand far out paces the supply and suddenly you now have a severe shortage.  Moreover, because of the artifically low price the farmers cannot afford to keep up with producing what is being demanded and suddenly become dependent on government subsidies just to maintain their meger income.  

Contrast with scenario two.  Price of rice rises substantially.  This people begin to riot.  In response the government puts no artificial restrictions on the price, but does provide vouchers to low income people so they can purchase rice.  Also, many pleas are made to private charities to provide rice.  This new high price of rice results in huge income gains for farmers, who in turn want to make even more profit by buying and cultivating more land for rice.  Over the next couple of years record harvests occur because of the increased income and investment.  

The former Soviet Union used extensive price controls that resulted in shortages on many items including toliet paper, bread, and milk.

New York City and San Francisco, suffered a severe shortage of affordable housing due to imposition of rent controls.  

Korea and Vietnam had rice shortages due to price ceilings on rice.

Argentina had a black market for selling beef at its market price when price ceiling was imposed.

There is no easy solution to fixing these problems.  If there were easy solutions, there wouldnt be any problem in the first place.  However, the government, even if not corrupt, almost always can make a bad situation worse by interferring.  It isnt just loss of market effeciency or "deadweight loss to society", its actual people that will suffer more as a result of government intervention. When things get out of whack, there are fundamental changes to society that must take place before the situation can get better, and this takes time.  Tyring to stick a band-aid on it through government intervention only makes it worse.  It will take substantially longer for the situation to right itself with government intervention and result in needless suffering that would have been avoided.

Answer 2

Yes it is true that binding price ceiling and price floor results in inefficient allocation of resources or DWL. But it is true only for perfectly competitive market. Real world is full of imperfect market. If market is imperfect then demand and supply curve don't reflect true benefit and cost. So there is either underproduction or overproduction. In this situation government intervention is inevitable. Government intervenstion is to bring the production level in the efficiency maximizing point i.e. towards perfectly competitive output.

Answer 3

Just go back to look at what happened in the US when that was done under the Nixon administration. It was not pretty.