Paul Krugman on price controls (reference) [View all]

[naaman fletcher]

Since Price controls are an issue in Latin America right now, I thought it might be useful for people to understand how they work and why their are shortages in Venezuela right now and will be soon in Argentina if the temporary price controls are made permenant Here is a reference book from Paul Krugman in case anyone wants to read more. I give you though a summary:

So Why Are There Price Ceilings?
We have seen three common results of price ceilings:

■a persistent shortage of the good
■inefficiency arising from this persistent shortage in the form of inefficiently low
quantity, inefficient allocation of the good to consumers, resources wasted in
searching for the good, and the inefficiently low quality of the good offered for sale
■the emergence of illegal, black market activity



http://www.worthpublishers.com/Catalog/uploadedFiles/Content/Worth/Product/About/Look_Inside/Krugman,_Micro_in_Mods_2e/KrugMicro2eMods_Mod08.pdf