Price controls

Governmental restrictions on prices / From Wikipedia, the free encyclopedia

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Price controls are restrictions set in place and enforced by governments, on the prices that can be charged for goods and services in a market. The intent behind implementing such controls can stem from the desire to maintain affordability of goods even during shortages, and to slow inflation, or, alternatively, to ensure a minimum income for providers of certain goods or to try to achieve a living wage. There are two primary forms of price control: a price ceiling, the maximum price that can be charged; and a price floor, the minimum price that can be charged. A well-known example of a price ceiling is rent control, which limits the increases that a landlord is permitted by government to charge for rent. A widely used price floor is minimum wage (wages are the price of labor). Historically, price controls have often been imposed as part of a larger incomes policy package also employing wage controls and other regulatory elements.

World War I poster of the United States Food Administration

Although price controls are routinely used by governments, Western economists generally agree that consumer price controls do not accomplish what they intend to in market economies, and many economists instead recommend such controls should be avoided.[1] However, since the credibility revolution starting in the 1990s, minimum wages have often found strong support among economists.[2][3][4][5]