B. Many economists argue that the government shouldn't enforce price floors and price ceilings because then su

Question

B. Many economists argue that the government shouldn't enforce price floors and price ceilings because then su

Answer 1

the world is not filled with nice people who obey supply and demand. Price gauging and taking advantage of the weak and ignorant happens on a regular basis. If a business will not act responsibly they must be regulated or lose thier liscence.

Answer 2

When governments try to influence the natural laws of the market by regulating price, it doesn't let the market do it's work.

Example:  Oil prices are high, there's a popular outcry....demand is going down slightly.

What is also happening, behind the scenes, are developments in alternative fuels and other energy development.  Ultimately there will be other products on the market that will compete for the oil dollar.

Government interferes:  It slows down the development of alternative fuels and sources....prolongs the agony too.

Answer 3

The government shouldn't enforce price floors or price ceilings because setting a mandatory price level creates a greater quantity demanded than quantity supplied (or vice versa).

That makes total surplus in the economy less, and less is produced, and that causes DWL (Dead Weight Loss), which is the potential surplus minus the one with the price floor/ceiling.

That is the textbook answer, hope that helped.